Investment Decision. Judy (from problem 1) is also considering investing the $12,500 in a certificate of deposit (CD). She is guaranteed a return of 4% on a four-year CD. How much would Judy earn from the CD? Which of the two alternatives offers the better return?
Problem 1
Interest Savings. Judy has just received $12,500 as an inheritance from her uncle and is considering ways to use the money. Judy's car is one year old, and her monthly payment is $304. She owes 48 more payments. The amount to pay off the loan is $12,460. How much will Judy save in interest if she pays off her car loan now?