1. You want to buy a used Lexus for $26,500. The bank has quoted you an 11.9% APR for a 60-month loan to buy the car. What will your monthly payment be? What is the effective annual rate on this loan?
2. You have the chance to buy a used widget-making machine for $200. You estimate that it will last for two more years, after which it will be worthless, but that it will bring in $150 revenue during each of those two years. If the interest rate is 8% per year, should you buy it