The Salesperson Offers, "Buy This New Car for $25,000 Cash

question 118

Multiple Choice

The salesperson offers, "Buy this new car for $25,000 cash or, with appropriate down payment, pay $500 per month for 48 months at 8 percent interest." Assuming that the salesperson does not offer a free lunch, calculate the "appropriate" down payment.

• A)$1,000.00
• B)$4,520.64
• C)$5,127.24
• D)$8,000.00 PV = $500

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Definitions:

Magazine Subscription

The payment for a pre-determined period of receiving periodic issues of a magazine or similar publication.

Paid

An amount of money that has been given or transferred in exchange for goods, services, or to settle a debt.

Accrued Expense

Expenses that have been incurred but not yet paid or recorded through a standard accounting transaction, often recognized at the end of an accounting period.

Electric Bill

The cost incurred for the consumption of electricity by a household, business, or organization.