A car company is offering a choice of deals. You can receive $600 cash back on the purchase, or a 2 percent APR, 4-year loan. The price of the car is $18,900 and you could obtain a 4-year loan from your credit union at 6 percent APR. What is the monthly payment of each deal?
A) cash back: PMT = $429.78, 2 percent APR: PMT = $410.04
B) cash back: PMT = $438.24, 2 percent APR: PMT = $424.09
C) cash back: PMT = $458.12, 2 percent APR: PMT = $414.09
D) cash back: PMT = $408.33, 2 percent APR: PMT = $410.04

Question

Quizplus · Accepted Answer

For the cash back deal, the loan amount is $18,900 - $600 = $18,300. Using the formula for a fixed-rate loan payment or an online loan calculator with a 6% APR for 4 years, the monthly payment is approximately $429.78. For the 2% APR deal, the loan amount remains $18,900. Using the same method with a 2% APR for 4 years, the monthly payment is approximately $410.04.

A Car Company Is Offering a Choice of Deals