introduction to finance

timer Asked: Feb 25th, 2015

Question description

Financial Planning Case #1: The Johnsons Decide to Buy a Car. After three years of riding a bus to work, Belinda finds that she can no longer do so because her employer moved to a location that is not convenient for public transportation. Thus the Johnsons are in the market for another car. Harry and Belinda estimate that they could afford to spend about $10,000 on a good used car by making a down payment of $2,000 and financing the remainder over 24 months at $355 per month.

  • a) Make suggestions about how the $355 might be integrated into the Johnsons’ budget (Table 3-5 on page 86) by making reductions in certain expense categories.
  • b) If they cannot make room in their budget for a $355 monthly car payment, would you recommend they finance a vehicle for 36 or 48 months? Why or why not?
  • c) Which sources of used cars should they consider? Why?
  • d) Assume that the Johnsons have narrowed their choices to two cars. The first car is a three-year-old Chevrolet Malibu with 4,000 miles; it is being sold for $10,000 by a private individual. The seller has kept records of all maintenance and repairs. The second car is a three-year-old Ford Fusion with 28,000 miles, being sold by a used-car dealership. Harry contacted the previous owner and found that the car was given in trade on another car about three months ago. The previous owner cited no major mechanical problems but simply wanted a bigger car. The dealer is offering a written 30-day warranty on parts only. The asking price is $10,400. Which used car would you advise the Johnsons to buy? Why?
  • e) Would you recommend that they purchase or lease a low-priced new vehicle instead of buying a used vehicle? Why or why not?

Studypool has helped 1,244,100 students
flag Report DMCA
Similar Questions
Hot Questions
Related Tags

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors