A major car manufacturer is developing a promotion offering new car buyers the choice between "below market"
4 year financing at 1.9% compounded monthly or a cash rebate. On the purchase of a $25,000 car, what cash rebate would make a car buyer indifferent between the following alternatives?
--Financing through the car dealer at the reduced interest rate.
--Taking the cash rebate and obtaining bank financing at 10.5% compounded monthly for the net "cash" price.

Question

Quizplus · Accepted Answer

The Answer of A major car manufacturer is developing a promotion offering new car buyers the choice between "below market"
4 year financing at 1.9% compounded monthly or a cash rebate. On the purchase of a $25,000 car, what cash rebate would make a car buyer indifferent between the following alternatives?
--Financing through the car dealer at the reduced interest rate.
--Taking the cash rebate and obtaining bank financing at 10.5% compounded monthly for the net "cash" price.

A Major Car Manufacturer Is Developing a Promotion Offering New