1. Sam bought a car for $40,000 at 0%" interest rate for 60 months. The...
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1. Sam bought a car for $40,000 at 0%" interest rate for 60 months. The financing was done through the financial arm of the car company. (a) [10 points) What is Sam's monthly payment? (b) [20 points) If Sam had paid cash for the car, he could have gotten the car for $34,000. Determine the interest rate that he is paying on this car loan. (Use interest interpolation.) (Hint: The requested interest rate is nominal annual interest rate.) (c) [10 points] Question (b) continued. What is the car company's rate of return on the car loan for Sam? (Hint: Rate of return is effective annual interest rate.)
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