Andy Would Like to Buy a New Car but Must

question 67

Multiple Choice

Andy would like to buy a new car but must complete a two-year commitment to the Peace Corp before he will drive the new car.The current price of the car Andy wants to buy is $22,000,and the dealer expects the price of a similar new car to be $24,000 in two years.If Andy can earn an annual interest rate of 3% on his money,should he buy the car now or wait for two years? Why? Note: Storage costs if Andy purchases the car are $0.Please limit your considerations to the factors offered in the answer choices.

• A)Buy now because if Andy invests the $22,000 today it will only increase in value to $23,340,and this is less than the cost of his desired new car in two years.
• B)Andy is indifferent because his $22,000 investment will be worth exactly $24,000 after two years.
• C)Buy in two years because at $24,000 the car will cost less than the $24,385 Andy will have after investing the money for two years.
• D)Buy in two years because $24,000 is a real deal for the car Andy wants.

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Definitions:

Reference Groups

Social groups that individuals compare themselves to for guidance in developing their own attitudes, values, and behaviors.

Wedding Decisions

Choices and plans made regarding the organization, theme, venue, and other aspects of a wedding ceremony and reception.

Roman Catholic Priest

A clergyman in the Roman Catholic Church who has been ordained to perform sacraments, guide, and serve the community.

Cultural Differences

The variations in beliefs, behaviors, values, and practices observed between different societies, ethnic groups, or nationalities.