2. The salesperson offers, "Buy this new car for $25,000 cash or, with appropriate down payment, pay $500 per month for 48 months at 8% interest." Assuming that the salesperson does not offer a free lunch, calculate the "appropriate" down payment. A. $8,000.00 B. $4,520.64 C. $5,127.24 D. $1,000.00

B. $4,520.64

Explanation:

The computation of the down payment is shown below:

= {Monthly payment * (1 - 1 + interest rate) ^-number of periods} : {Interest Rate}

where,

Interest Rate = 8% : 12 months = 0.66667

= {500 * (1 - 1 + 0.67) ^-48} : {0.67}

After solving this, the amount is $20,480.956

Now the down payment is

= $25,000 - $20,480.956

= $4,519.04 approx