An auto dealership is advertising that a new car with a sticker price of $34,128 is on sale for $25,995 if payment is made in full, or it can be financed at 0% interest for 72 months with a monthly payment of $474. Note that 72 payments × $474 per payment = $34,128, which is the sticker price of the car. By allowing you to pay for the car in a series of payments (starting one month from now) rather than $25,995 now, the dealer is effectively loaning you $25,995. If you choose the 0% financing option, what is the effective interest rate that the auto dealership is earning on your loan? (Hint: Discount the payments back to current dollars, and use Goal Seek to find the discount rate that makes the net present value of the payments = $25,995.)

effective annual rate = 9.77%

monthly rate = 0.78%

Explanation:

we can solve this by using a financial calculator or an excel spreadsheet:

our initial outlay = -25,995

then we have 72 cash flows = 474

I prefer to use excel, since all you need to do is use the IRR formula to determine the interest rate at which the NPV = 0. The interest rate at which NPV = 0 is the effective monthly interest rate. IRR = 0.78% monthly

In order to determine the effective annual rate:

EAR = (1 + 0.0078)¹² - 1 = 1.0977 - 1 = 0.0977 = 9.77%

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.

answer; read and consider the content of the items;