Search for question
Question

When interest rates are low, some automobile dealers offer loans at 0% APR, as indicated in a 2016 advertisement by aprominent car dealership, offering zero percent financing or cash back

deals on some models. Zero percent financing means the obvious thing-that no interest is being charged on the loan. So if we borrow $1,200 at 0%interest and pay it off over 12 months, our monthly payment will be $1,200/12 = $100. Suppose you are buying a new truck at a price of $26,000. You plan to finance your purchase with a loan you will repay over two years. The dealer offers two options: either dealer financing with 0% interest, or a $2,600 rebate on the purchase price. If you take the rebate, you will have to go to the local bank for a loan (of $23,400) at an APR of 6.5%. What would your monthly payment be if you used dealer financing? (Round your answer to the nearest cent.)

Fig: 1

Fig: 2

Fig: 3

Fig: 4