You need a $10,000 car loan and are talking to two different banks.
a. Big Bank offers you a $10,000 auto loan requiring 48 monthly payments of $275, paid at the end of each month. What is the APR of the loan? What is the effective annual rate?
b. Little Bank’s loan has 4 annual year-end installments, each equal to 12 times the Big Bank monthly loan payments. Should you accept Little Bank’s loan?
c. What annual payment would make the Little Bank loan equivalent to the Big Bank loan? Why is it not simply 12 times the Big Bank monthly payment?