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- anonymous

I really dont understand how to do this:
A car dealer offers you two deals on a car that costs $16,000. Please calculate the monthly payment, given these two payment options the car dealer is offering.
Payment Option 1: You can finance the car for 60 months with no interest if you make a $3,000 down payment.
Payment Option 2: You can finance the car for 72 months (6 years) with 1% simple annual interest and no down payment. (Hint: To calculate simple annual interest, use the formula Interest = Principal * Rate * Time (in years). Add the amount of interest to the price of the car.)
Which monthly payment amount is lower?

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- anonymous

- jamiebookeater

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- anonymous

Payment Option 1:
$16,000 - $1,000 = $15,000 after down payment
$15,000 / 60months = $250/month
Payment Option 2:
$16,000 * 1.02 / 72months = $226.67/month
so 2nd one is better one.

- anonymous

Just solve for the monthly payment options.
Payment Option 1)
You can finance the car for 60 months with no interest if you make a $3,000 down payment. SO:
16,000 - 3,000 = 13,000
13,000 /60 = 216.666
Monthly payment: $216.67
Payment Option 2) You can finance the car for 72 months (6 years) with 1% simple annual interest and no down payment.
SO:
16,000 divided into 6 years = 2666.67
Multiply by 1% interest... 0.1 * 2666.67 = 26.67
2666.67 + 26.67 = 2693.34 per year.
Divide that by 12 months. 2693.34 /12 = 224.45
Monthly Payment: $224.45

- anonymous

Compare the monthly payments. Which is cheaper?

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- anonymous

@bloodrain its $3,000 down payment not $1,000

- anonymous

dam, im sorry about tht error :/

- anonymous

Monthly payment 1. Thank you so much, Jazy(:

- anonymous

Payment Option 1:
$16,000 - $3,000 = $13,000 after down payment
$15,000 / 60months = about $216/month
Payment Option 2:
$16,000 * 1.02 / 72months = $226.67/month
so 2nd one is better one.

- anonymous

Welcome. (:

- anonymous

By the way, the 0.1 was meant to be a 0.01.

- anonymous

But the answer doesn't change, I just made a mistake writing it. (:

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