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  3. 5 bill buys a car every 2 years as follows: he ini

5 Bill buys a car every 2 years as follows: he initially makes a down...

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Accounting

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5 Bill buys a car every 2 years as follows: he initially makes a down payment of $12.000 an a $30,000 car. The balance is paid in 24 equal monthly payments with annual interest of 12%. When he has made the last payment, he trades in the 2-year old car for $12.000 on a new $30,000 car the cycle begins again. Doug decided on a different purchase plan. He though he would be better off if he paid $30,000 cash for a new car. Then he would make a monthly deposit in a savings account so that, at the end of 2 years, he would have $18,000 in the account. The $18,000 plus the $12,000 trade-in value of the car will allow Doug to replace his 2-year old car by $30,000 for a new one. The bank pays 3% interest, compounded monthly. a. What is Bill's monthly loan payment? b. What is Doug's monthly savings account deposit? c. Why is Doug's monthly savings account deposit smaller than Bill's payment? 6. Assuming that Alternatives B and C are replaced with identical units at the end of their useful lives and an 80% interest rate which alternative should be selected? Use an annual

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