Prof. Finance decides to buy a 2019 Mazda 6 Signature Edition.After paying a down payment and taxes, Prof. Finance can financethe rest of the purchase price with a loan of $24,000 for 60 monthsat a special finance rate offered by Mazda of 1.9% APR compoundedmonthly.

• He finds out that Mazda has a second offer of $1000 cash back(rebate) in place of the special 1.9% finance rate offered with thecash back being an additional down payment. Prof. Finance finds hecan get 2.9% APR financing online for 60 months if he takes the$1000 cash back offer. Answer the following questions.

1. What is the effective annual rate for each loan?

2. What would be the monthly car loan payment under the Mazda’s1.9% APR financing offer (assume a 60-month loan term)?

3. What would be the monthly car loan payment under the Mazda’s$1000 cash back offer and the 2.9% APR pre-approved financing(assume a 60-month loan term)?

4. At what APR would Prof. Finance be indifferent between thetwo offers? In other words, what APR (assuming a 60-month loanterm) for the $1000 cash back offer would have the same monthlypayment with the 1.9% APR financing offer?

5. Let’s assume you go with the offer in question #3. Constructan amortization schedule for the loan for all 60 monthly payments(see section 5-18 of the textbook). What is your loan balance after36 months?

6. The local Mazda dealer has found a special 2.49% APR loanrate for 60 months from Citibank that Prof. Finance qualifies forif he elects the $1000 cash back option. Prof. Finance says that’sgreat! What would be the monthly payment under this loan?

7. Prof. Finance is more than happy with the 2.49% APR and $1000cash back offer but wants a monthly payment of $375 (assume a60-month loan term) and realizes he will have to put more moneydown. How much additional money will Prof. Finance have to put downin order to achieve his target monthly payment? Note: original loanamount with cash back was $23,000.