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Find the monthly payment under plan i

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At the GM dealership, you find a car priced at $17,195. There are two special purchase plans. Plan I: After making a down payment of $5,000, you can finance the purchase at an APR (annual percentage rate) of 2.4% compounded monthly. Plan II: The dealer gives you a discount ("rebate") of $800 on the purchase price (so that your purchase price is $17,195 - $800). However, the annual financing rate will be an APR of 8.4% also compounded monthly, and the required down payment is $5,600. Assume that, under either plan, you will finance your car purchase over 3 years. Also assume that the effective annual interest rate is 5% (that is the EAR of a similar loan in the market). The payments are made at the end of each month.

a) Find the monthly payment under Plan I.

b) Find the monthly payment under Plan II.

c) Which plan should you choose? Show you reasoning.

Reference no: EM132370462

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