Question

premium Mustang convertible, Which costs $27,000, and she has no down payment other than the cash back from Ford. If she chooses the $1,000 cash back, 5 setie can beenow trom the Viech Credit Union at 6.1 percent APR for 48 months (Suzie's credit isn't as good as Prof, Finance). What wil Suze Students monthiy paymert be under esch option? Which opton shoud ve choose? a. If Suzie chooses 4.1 percent APR financing for 48 months to buy the premium Mustang convertible, which coss $27,000= PMTL44.201t78), what wit ber moratiy paymant be? (Round to the nearest cent.) b. If Suzie chooses $1,000 cash back to buy the premium Mustang corvertiblo and borrows $26,000 from the VTech Credt Urion at 6,1 percent APR bor 48 months, how much wil her monthy payment be? (Round to the nearest cent.) c. Which option should Suzie Student choose? (Select the best choice below.) A. Choose low interest rate financing because the monthly payment under this cotion is lower. B. Choose cash back financing because the monthly payment under this option is lower.

Answer 1

To determine the best financing option for the Mustang convertible, calculations for both scenarios—a lower APR without cash back, and a higher APR with cash back—are required. The monthly payments must be computed for $27,000 at 4.1% APR, and for $26,000 at 6.1% APR. The better option will be the one with the lower monthly payment.

Step-by-step explanation:

To answer the student's questions regarding the monthly payments and the best financing option for buying a premium Mustang convertible, two calculations will be necessary. One for each financing scenario described: with the lower interest rate without cash back, and with the higher interest rate with a cash back incentive.

For part a, assuming an APR of 4.1% for 48 months on a loan amount of $27,000, Suzie's monthly payment can be found using the loan payment formula and then rounding to the nearest cent.

For part b, if Suzie chooses the $1,000 cash back and borrows $26,000 from VTech Credit Union at 6.1% APR for 48 months, her monthly payment would again be calculated using the loan payment formula.

For part c, to determine which option Suzie should choose, we need to compare the monthly payments calculated for each scenario. If the monthly payment with the low interest rate is less than the monthly payment with the cash back, Suzie should go for the low interest rate. Conversely, if the cash back option results in lower monthly payments, that would be the better choice.