Smith borrows 20000 to purchase a car. The car dealer finances the purchase and offers Smith two alternative financing plans, both of which require monthly payments at the end of each month for 4 years starting one month after the car is purchased.

1. 0% interest rate for the first year followed by 6% nominal annual interest rate compounded monthly for the following three years.

2. 3% nominal annual interest rate compounded monthly for the first year followed by 5% nominal annual interest compounded monthly for the following three years.

For each of 1 and 2 find the monthly payment and the outstanding balance on the loan at the end of the first year.

Answer rating: 100% (QA)

Case 1 Total Time Period 48 Loan Amount 20000 Rate for 1 year 0 Rate after 1 year 005 Let th... View the full answer