Jeremy Is in the Process of Purchasing a Car

question 35

Multiple Choice

Jeremy is in the process of purchasing a car. The list price of the car is €36,000. If Jeremy pays cash for the car, the dealer will reduce the price by 10%. Otherwise, the dealer will provide financing where Jeremy must pay €7,705 at the end of each of the next five years. Compute the effective interest rate to the nearest percent that Jeremy would pay if he chooses to make the five annual payments?

• A) 5%
• B) 6%
• C) 7%
• D) 8%

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Definitions:

Efficiency

The property of a resource allocation of maximizing the total surplus received by all members of society.

Equality

The property of distributing economic prosperity uniformly among the members of society.

Decision Making

The cognitive process resulting in selecting a course of action among several alternatives.

Change Minds

The process of altering one's thoughts, opinions, or decisions based on new information or reconsideration.