As job offers begin to pour in for 4th year engineers graduating at UBC, Joe Schmatz,...

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As job offers begin to pour in for 4th year engineers graduating at UBC, Joe Schmatz, Materials engineer, feels confident about his economic future and begins to pay close attention to automobile commercials on TV. He goes to the local Honda dealer, takes a test drive and decides he wants to purchase an Accord. The salesman offers the car for $28,995 with a 0.9% (annual interest rate but compounded monthly) financing plan with monthly payments for 5 years. (a) What will Joe's monthly payments be under this plan? (b) The real interest rate that Joe is being charged is 6 % (annual rate but compounded monthly). The purchase price has been inflated to cover the cost of the financing plan. 6% is the interest rate that the bank is charging the automobile dealer. If Joe were to obtain cash from another source, what is the cash price that he should be able to negotiate that would be equivalent to the financing package cited above? As job offers begin to pour in for 4th year engineers graduating at UBC, Joe Schmatz, Materials engineer, feels confident about his economic future and begins to pay close attention to automobile commercials on TV. He goes to the local Honda dealer, takes a test drive and decides he wants to purchase an Accord. The salesman offers the car for $28,995 with a 0.9% (annual interest rate but compounded monthly) financing plan with monthly payments for 5 years. (a) What will Joe's monthly payments be under this plan? (b) The real interest rate that Joe is being charged is 6 % (annual rate but compounded monthly). The purchase price has been inflated to cover the cost of the financing plan. 6% is the interest rate that the bank is charging the automobile dealer. If Joe were to obtain cash from another source, what is the cash price that he should be able to negotiate that would be equivalent to the financing package cited above?

Answer rating: 100% (QA)

SOLUTION a To calculate Joes monthly payments under the financing plan we can use the formula for th... View the full answer