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Prof. Finance decides to buy a Nissan Maxima. After paying adown payment and taxes, Prof. Finance can finance the rest of thepurchase price with a loan of $28,000 for 60 months at a specialfinance rate offered by Nissan of 0.9% APR compounded monthly. Hefinds out that Nissan has a second offer of $2250 cash back(rebate) in place of the special 0.9% finance rate offered. Prof.Finance finds he can get 3.39% APR compounded monthly financingonline for 60 months if he takes the $2250 cash back offer. The$2250 cash back would be used as an additional down paymentreducing the loan amount.

What is the effective annual rate for each loan option?

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Nelly Stracke
Nelly StrackeLv2
28 Sep 2019

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