Problem
You are buying a new $20,000 car and have the option to pay for the car with a 0% loan or to receive $500 cash back at the time of the purchase. With the loan, you pay $5,000 down when you purchase the car and then make three $5,000 payments, one at the end of each year of the loan. You currently have $50,000 in your savings account.
a. The rate of interest on your savings account is 4% and will remain so for the next three years. Which payment method should you choose?
b. What interest rate, i, makes you indifferent between the two payment methods?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.