Financial Analysis for Prof. Business: Comparing Car Loan Offers
Effective Annual Rate Calculation
The question presents a scenario where Prof. Business is considering two financing options for purchasing a 2022 Honda CR-V Touring edition: one with a special 2.9% APR financing rate and another with a $1000 cashback offer and a 4.29% APR financing rate. The question asks for calculations related to the effective annual rate, monthly car loan payments, indifference between the two offers, construction of an amortization schedule, and additional down payment required to achieve a specific monthly payment.
1. What is the effective annual rate for each loan?
Calculate the effective annual rate for the 2.9% APR financing offer and the 4.29% APR cash back offer.
Effective Annual Rate for 2.9% APR offer: ____
Effective Annual Rate for 4.29% APR cash back offer: ____
2. Monthly Car Loan Payment
Calculate the monthly car loan payment under the Honda's 2.9% APR financing offer.
Monthly payment for 2.9% APR offer: $____
3. Monthly Car Loan Payment with Cash Back Offer
Calculate the monthly car loan payment under the $1000 cash back offer and the 4.29% APR pre-approved financing.
Monthly payment for 4.29% APR cash back offer: $____
4. Indifference Point
At what APR would Prof. Business be indifferent between the two offers?
APR for indifference point: ____
5. Amortization Schedule & Loan Balance
Construct an amortization schedule for the loan for all 48 monthly payments. What is your loan balance after 36 months?
Loan balance after 36 months: $____
6. Special Loan Rate Offer
Calculate the monthly payment under the special 3.19% APR loan rate offer from Citibank.
Monthly payment for 3.19% APR Citibank loan: $____
7. Additional Down Payment Calculation
How much additional money will Prof. Business have to put down to achieve a monthly payment of $425?
Additional down payment required: $____