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You wish to purchase a new pickup truck. The dealership offers to finance $40,000 at a...

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Finance

You wish to purchase a new pickup truck. The dealership offersto finance $40,000 at a 2% annual rate (AR) with 36 monthlypayments. The first payment starts 6 months from now. Marketinterest rates are 4% AR. Determine your true cost of purchasingthe pickup (i.e., the present value of your payments).

Please show work. Thank you :)

Answer & Explanation Solved by verified expert
4.2 Ratings (628 Votes)
As first paymentstarts after 6 months from now we shall find future value of theloan amount as followPV 1rn 40000 102 40800Here r 4 AR is givenHence for 6 months we shall consider r 4 612 2 002Now we    See Answer
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