A cash-strapped young professional offers to buy your car with four, equal annual payments of $3,000, beginning 2 years from today. Assuming you're indifferent to cash versus credit, that you can invest at 10%, and that you want to receive $9,000 for the car, should you accept?

Question

Quizplus · Accepted Answer

PV = $3,000{(1/.1) - [1/(.1 × 1.1⁴)]}/1.1PV = $8,645.09

A Cash-Strapped Young Professional Offers to Buy Your Car with Four