Generous Motors is offering its customers two financing choices on its popular line of Ventura automobiles. Under Option A, customers receive a $1,000 rebate. Under Option B, customers receive a special financing rate of 2.4% per year, compounded monthly. Assume a customer who chooses Option A can finance the full purchase price of the car over a four-year period at an interest rate of 9% per year, compounded monthly. Assume the customer will purchase the car and keep it for four years and can finance the entire purchase price. i. Assume the purchase price of the new car is $20,000 and the customer plans to keep the car for the entire four years. Which option should you choose? ii. What rebate amount would make the customer indifferent between Option A and Option B?

Now on a different scenario imagine, You have 30 years left until retirement and want to retire with $1.5 million. Your salary is paid annually and you will receive $70,000 at the end of the current year. Your salary will increase at 3% per year, and you can earn a 10% return on the money you invest. If you safe a constant percentage of your salary, what percentage of your salary must you save each year?

Answer rating: 100% (QA)

i Lets calculate the total cost of financing under each option to determine which option to choose O... View the full answer