Exercise $3\mathrm{.}25$

When you purchase a car, you may consider buying a brand$-$new car or a used one. A fundamental trade$-$off in this case is whether you pay repair bills $($uncertain at the time you buy the car$)$ or make loan payments that are certain.

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Consider two cars, a new one that costs $$15,000$ and a used one with $75,000$ miles for $$5,500.$ Let us assume that your current car$$s value and your available cash amount to $$5,500,$ so you could purchase the used car outright or make a down payment of $$5,500$ on the new car.