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The Magic Pumpkin Limousine Company Wants to Purchase a Car

question 39

Essay

The Magic Pumpkin Limousine Company wants to purchase a car entertainment system for one of its automobiles. The entertainment system vendor has offered to finance the $2,000 purchase over one year in 12 installments, with a total of $200 in interest to be paid on the loan. Magic Pumpkin's bank has offered to finance the purchase with an installment loan, where $155 in interest will be repaid and payments on the loan must be made quarterly. What are the effective interest rates on these loans? Which loan should they select?


Definitions:

Investor Relations

A component of corporate communication that involves managing and communicating information between a company and the investment community.

Roles and Responsibilities

The specific duties and expectations associated with a particular job or position within an organization.

Financial Community

Consists of individuals and institutions that participate in the investment, trading, and management of financial assets.

Chief Executive Officer

The highest-ranking executive in a company or organization, responsible for making major corporate decisions, managing operations, and communicating with the board of directors.

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