Edward Frank would like to purchase a Mercedes 550 GL that sells for $75,000. He plans to take out a 5-year loan at 12%, compounded monthly. The most Mr. Frank can afford for monthly payments is $1,50 but he can sell his current car to raise additional cash for a down payment.

a. What is the minimum amount that Mr. Frank can accept for his current car and still be able to purchase the Mercedes?

b. What is the EAR for this car loan?

Answer rating: 100% (QA)

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