Finance homework help?

• united states blood bank
• bachelors degree finance
• online payment processing

Suppose you are going to buy a car. The cost of car is $20,000. You have $8,000 for down payment. You can borrow the balance of $12,000 from dealership’s finance company at 2% APR, with monthly payment for 36 months or you can borrow from a bank with 8% APR monthly payment for 3 years, and receive a $2,000 rebate on the purchase price. Assume that if you take the rebate, you will apply it toward the purchase. Which alternative is better deal?


Option 1:

PV = 12000

Fv = 0

i = 2% / 12

n = 3 x 12 = 36 months


Option 2:

PV = 12000 - 2000 (rebate) = 10000

FV = 0

i=8% /12

n = 3 x12 = 36 months


Equation? Do I use PV of ordinary annuity? And since it's in APR should I convert it into EAR? Thanks!

Finance homework help?