Prof. Finance decides to buy a Nissan Maxima. After paying a down payment and taxes, Prof. Finance can finance the rest of the purchase price with a loan of $32,000 for 60 months at a special finance rate offered by Nissan or 0.9% APR compounded monthly. Answer the following.
1. What is the effective annual rate charged on this car loan?
2. What would be Prof. Finance's monthly payment under this loan?
3. Prof. Finance also discovers instead of the special finance rate he could receive $1500 cash back that he can use as an additional down payment which would lower his loan amount by the cash back amount. At what APR would Prof. Finance have the same monthly payment with the cash back option as he would with the special finance rate offer that you found in the last question?
4. Prof. Finance finds he can get 2.0% APR Financing if he elects the cash back option. What will his monthly payment be under this option and should he elect this cash back option over Nissan's special APR financing option?