Question

You have decided to buy a used car. The dealer has offered you two options: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) a. Pay $530 per month for 20 months and an additional $12,000 at the end of 20 months. The dealer is charging an annual interest rate of 24%. b. Make a one-time payment of $15,392, due when you purchase the car. Determine how much cash the dealer would charge in option (a)

Answer 1

To determine the total cash charge for option (a), the present value of monthly payments and the lump sum payment at the end must be calculated using the PVA formula, and then added together. However, the full PVA table or formula is not provided to perform the calculation.

Step-by-step explanation:

The student is trying to determine how much cash the dealer would charge in option (a) for buying a used car with an annual interest rate of 24% and additional costs.

To calculate this, we use the formula for the present value of an annuity (PVA) to find out the present value of the monthly payments, and then add the present value of the lump sum payment that is to be paid at the end of the loan period.

Unfortunately, the question does not provide the full PVA table or formula required for the calculation, but typically, the calculation would look like this:

• Calculate the present value of the monthly payments of $530 over 20 months.
• Calculate the present value of the $12,000 payment to be made at the end of 20 months.
• Add the present value of the monthly payments to the present value of the lump sum payment to get the total present value, or cash charge, of the purchase.

Without the full PVA table or formula provided, we cannot perform these calculations accurately.