You Are About to Purchase a New Car from a Dealer

question 31

Multiple Choice

You are about to purchase a new car from a dealer who has a new and unusual payment plan.You have the choice to pay $28,000 cash today or $31,000 in four years.If you have the opportunity to borrow the cash price value of the car at a rate of 2.5% and repay the loan in a lump sum in 4 years,which option should you take and why?

• A)Pay the $31,000 in the future because it it always better to delay payment for new assets.
• B)Pay the $31,000 in the future because the PV is less than $28,000 today.
• C)Pay the $28,000 cash today even if you need to borrow the money because the FV of the repayment in 4 years is only $30,906.76.
• D)Pay the $28,000 cash today because you pay a full $3,000 less than if you wait and pay the other option as presented.

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Definitions:

Cholesterol

A waxy substance found in the lipids (fats) in the blood, essential for the creation of vitamin D, steroid hormones, and bile acids, but high levels can lead to health risks.

Highest Occupied

Refers to the Highest Occupied Molecular Orbital (HOMO), which is the top-most energy molecular orbital that is occupied by electrons in a molecule under the ground state.

π MO

Pi molecular orbitals are formed by the overlap of p orbitals that are oriented parallel to each other, playing a key role in the bonding of molecules with conjugated systems.

1,3-Butadiene

A basic conjugated diene having the chemical structure C4H6, utilized as a monomer for synthesizing synthetic rubber.