Calculate the present value of each option

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Reference no: EM131825669

Your neighbor is buying a new car. He has the following options to finance the purchase:

I. Pays $70,000 today (in time 0)

II. Buy under a "no payments for three years" program by agreeing to pay $82,500 three years from today (in time 3).

III. Make 36 monthly payments over 3 years of $2,100 payable at the end of each month.

a) If the interest rate is 5.5% annually, calculate the present value of each option

b) At what interest rate do Option II and Option III have the same present value?

Reference no: EM131825669

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