Emily wants to buy a new car for $25,300, including all fees and taxes. Now's a...

  

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Emily wants to buy a new car for $25,300, including all fees and taxes. "Now's a good time to buy," claims the salesman, "we're offering 4 year loans at 5.9%. Even if you have the cash, you're better off borrowing." Emily is confused. The salesman goes on to explain the payment on the car loan would be $593.01, which means that total interest paid on the loan will be $3,164.48. By investing the $25,300 at current savings account rates of 3.5% (compounded monthly), Emily could generate interest of $3,796.00 which means she'd be $631.52 better off by investing her money in a savings account. (a) Verify the numbers in the second paragraph. (b) Is Emily really better off by borrowing the money for her new car? Emily wants to buy a new car for $25,300, including all fees and taxes. "Now's a good time to buy," claims the salesman, "we're offering 4 year loans at 5.9%. Even if you have the cash, you're better off borrowing." Emily is confused. The salesman goes on to explain the payment on the car loan would be $593.01, which means that total interest paid on the loan will be $3,164.48. By investing the $25,300 at current savings account rates of 3.5% (compounded monthly), Emily could generate interest of $3,796.00 which means she'd be $631.52 better off by investing her money in a savings account. (a) Verify the numbers in the second paragraph. (b) Is Emily really better off by borrowing the money for her new car?

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A B D E First alternative taking car on EMI Present value 2530000 ... View the full answer