Kangaroo Motors Has a Used Car for Sale at $4,300

question 5

Essay

Kangaroo Motors has a used car for sale at $4,300, which you want to buy for driving to school.Your parents are willing to lend you the money and charge only 3.60 % APR compounded monthly.They want the loan repaid in equal payment over 48 months, with the first payment due at the end of the month in which you buy the car.You estimate that the monthly cost of operating the car, including gas, insurance, maintenance, and licence fees, will be $160 and payable at the start of each month.The cost of a monthly bus pass is $95.You expect that the car will be totally worn out in four years, with zero resale value, when you are finished school.Your discount rate is 5% EAR, compounded annually.
a)What is the monthly interest rate on the parents' car loan?
b)What is the monthly car repayment?
c)What is the monthly opportunity cost of funds?
d)What is the present value of the car costs?
e)If you have three roommates who also need transportation to and from school, how much do you and your roommates each need to pay a month in order to cover all your costs?

---

Definitions:

Learned Response

A behavior that has been acquired through conditioning or learning, as opposed to being a natural, instinctive reaction.

Extinction

In behavioral psychology, it refers to the gradual weakening and disappearance of a conditioned response when the conditioned stimulus is no longer paired with the unconditioned stimulus.

CR Fading

A technique in conditioning where the conditioned response diminishes over time when reinforcement is removed.

Conditioned Fear

A learned response to a previously neutral stimulus that has been repeatedly paired with an aversive stimulus, leading to the elicitation of fear responses to the neutral stimulus.