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Car dealers are trying a number of promotional methods to induce car sales. One dealer offers a year’s supply of free gas to any consumer who buys a car during the month of July.

If the average car driver accumulates 1000 miles per month over the course of a year’s driving. And the average price of a gallon of regular gas is $3.50 while the average mileage is 22 miles per gallon what is the present value of this promotion to the average driver for the 12 month period.

Use 6% as the interest rate.

a) Calculate the present value of the gas promotion. (The payment for the gas promotion is made on the one year anniversary of the car purchase.)

b) Given the present value of the gasoline promotion what is the net price of a $40,000 vehicle?

FIND AND STATE THE: NPER, PMT, FV, AND TYPE if any

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