1 answer

You are going to buy a new car worth $23,800. The dealer computes your monthly payment...

Question:

You are going to buy a new car worth $23,800. The dealer computes your monthly payment to be $510.45 for 60 months of financi

You are going to buy a new car worth $23,800. The dealer computes your monthly payment to be $510.45 for 60 months of financing. What is the dealer's effective rate of return on this loan transaction? The dealer's effective rate of return is %. (Round to one decimal place.)

Answers

Price of the car=PV=$23800

Monthly installment=R=$510.45

Period=n=60 months

Let the monthly interest rate be i. So

PV=R*(P/A,i,60)

23800=510.45*(P/A,i,60)

(P/A,i,60)=(23800/510.45)=46.6255

I shall use try and error method to estimate the i

Let us first try at i=1%

(1+i) (P/A, i,n)=-

1- (P/A, 0.01,60) = - (1+0.0160 - = 44.9550 0.01

Our interest factor is higher than (P/A,0.01,60). So, let us try at lower interest rate say 0.9% and 0.85%

1- 10.00960 (P/A, 0.009, 60) = 2 - = 46.2047 0.009

1-140, 0085) (Ρ/Α, 0.0085, 60) =- - = 46.8481 0,0085

Out interest factor (P/A,i,60) lies between above two interest factors, We can say that i is between 8.5% and 9%

Let is try at 8.6%, and 8.7%

1 - (1+0.0086 60 (P/A, 0.0086,60) = – -= 46.7184 0.0086

1-140.0087) (Ρ/Α, 0.0087, 60) =- 46.5892 0.0087

Let us try at i=8.65%, 8.66% and 8.67%

1- (1+0.00865)60 = 46.6538 (P/A, 0.00865,60) = – 0.00865

1- (1+0.0086660 (P/A, 0.00866,60) = - - = 46.6408 0.00866

1- (1+0.00867)60 (P/A, 0.00867, 60) = – - = 46.6279 0.00867

We can see our (P/A,i,60) value is quite close to value of (P/A,0.00867,60)

We can say that i=0.867%

(We can also get this value by using Excel or financial calculators. Exact value is 0.8672%)

Effective return=(1+0.00867)^12-1=10.91% or say 10.9%

.

Similar Solved Questions

1 answer
Swansea Manufacturing currently produces 3,000 tires per month. The following per unt data for 3.000 tires...
Swansea Manufacturing currently produces 3,000 tires per month. The following per unt data for 3.000 tires apply for sales to regular customers: Direct materials Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing costs The plant has capacity f...
1 answer
Use the Standard Normal Table or technology to find the Z-score that corresponds to the following...
Use the Standard Normal Table or technology to find the Z-score that corresponds to the following cumulative area. 0.8971 The cumulative area corresponds to the 2-score of (Round to three decimal places as needed.)...
1 answer
The speed of a moving bullet can be determined by allowing the bullet to pass through...
The speed of a moving bullet can be determined by allowing the bullet to pass through two rotating paper disks mounted a distance 70 cm apart on the same axle. From the angular displacement 37.5 ◦ of the two bullet holes in the disks and the rotational speed 610 rev/min of the disks, we can de...
1 answer
Increasing magnitude of lattice energy KCl, KF, Kl / Question 8 4 pts / A hydrogen...
increasing magnitude of lattice energy KCl, KF, Kl / Question 8 4 pts / A hydrogen atom with an electron absorbs light having a frequency of 6.90 x 1014 Hz thus causing the electron to transition to a final energy state of n = 5. Determine the principal quantum number level for the initial sta...
1 answer
A medication reminder order call for Your patient receives atropine 0.4 subQ stat. Atropine is available...
A medication reminder order call for Your patient receives atropine 0.4 subQ stat. Atropine is available 400mg. How much atropine would you administer?...
1 answer
Please please help with all of them no thorough explanation needed! 5. Select the most appropriate...
please please help with all of them no thorough explanation needed! 5. Select the most appropriate answer. When using a dichotomous key outside to identify unknown organisms one should A. not remove parts of the plant or disrupt the ecosystem B. be aware of hazards such as ticks and poison ivy C. sh...
1 answer
Chapter 10, Problem 061 A 15.0 kg wheel, essentially a thin hoop with radius 2.30 m,...
Chapter 10, Problem 061 A 15.0 kg wheel, essentially a thin hoop with radius 2.30 m, is rotating at 165 rev/min. It must be brought to a stop in 26,.0 s. (a) How much work must be done to stop t (b) What . It must be is the required average power? Give absolute valuesfor both parts. (a) Number (b) N...
1 answer
Using activity coefficients, how many grams of Mn(OH)2 will dissolve in 500ml of 0.0167M CaCl2 saturated...
Using activity coefficients, how many grams of Mn(OH)2 will dissolve in 500ml of 0.0167M CaCl2 saturated with Mn(OH)2? (FW of Mn(OH)2 = 88.95 g/mol)...
1 answer
A pump station must fill a 15-million-gallon tank within 10 hours. The pump must overcome a...
A pump station must fill a 15-million-gallon tank within 10 hours. The pump must overcome a total head of 115 feet (this include both elevation head and friction). Assume the pump and motor efficiency are 0.75 and 0.90, respectively. Water temperature is 80 °F. Assume the cost of electricity is ...
1 answer
How do you use the Distributive Property to rewrite each expression #-6a(2b+5c)#?
How do you use the Distributive Property to rewrite each expression #-6a(2b+5c)#?...
1 answer
Can somone check this for me
Can somone check this for me. Directions: Identify the property that is used. (1) 5+(6+7)=5+(7+6) My answer: The commutative property of addition (2) 4 x(3+2)=(3+2) x 4 My answer. The communtaive property of multiplication right on both....
1 answer
150 words If you were to learn a programming language, what would it be and why?
150 words If you were to learn a programming language, what would it be and why?...
1 answer
You add 50 g of ice at –5° C to 200 g of water at 25°...
You add 50 g of ice at –5° C to 200 g of water at 25° C. What is the final temperature of the mixture, assuming that no heat is lost to the outside? Please answer this in a simple step by step process so that I can understand....
1 answer
Doles Corporation uses the following activity rates from its activity-based costing to assign overhead costs to...
Doles Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products. Activity Cost Pools Setting up batches Processing customer orders Assembling products Activity Rate $65.32 per batch $22.38 per customer order $10.11 per assembly hour Data conce...
1 answer
Problem 5 - Rigid Body Kinetics (25 pts) The sheave of 400-mm radius has a mass...
Problem 5 - Rigid Body Kinetics (25 pts) The sheave of 400-mm radius has a mass of 50 kg and a radius of gyration of 300 mm. The heave and its 100-kg load are suspended by the cable and the spring, which has a stiffness of 1500 N/m. If the system is released from rest with the spring initially stret...
1 answer
Question 1 (3.333 points) Since the 1990's... O Algorithmic and high-frequency trading have been increasing, and...
Question 1 (3.333 points) Since the 1990's... O Algorithmic and high-frequency trading have been increasing, and bid-ask spreads have been increasing the percentage of trades in NYSE-listed stocks that occur on a separate exchange has increased, and algorithmic and high-frequency trading have be...
1 answer
Present the assumptions of: i) Classical theory of unemployment ii) Keynesian theory of unemployment iii) Insider-Outsider...
Present the assumptions of: i) Classical theory of unemployment ii) Keynesian theory of unemployment iii) Insider-Outsider model of unemployment iv) Efficiency-Wage model of unemployment Which of the models best addresses the unemployment situation in Nigeria...
1 answer
10 POINTS each question. SHOW DETAILED WORK, CALCUATIONS, FORMULAS, AND UNITS. EEDS T。OF-AND-RI rreN 1. Chlorofluorocarbons...
10 POINTS each question. SHOW DETAILED WORK, CALCUATIONS, FORMULAS, AND UNITS. EEDS T。OF-AND-RI rreN 1. Chlorofluorocarbons with the general formula CF Cln were used for decades in refrigerators and air conditioners until they were found to degrade Earth's ozone layer. For which value of ...