Your car, which has market value of $7,000, is damaged in a hailstorm, and the insurance company giv

Your car, which has market value of $7,000, is damaged in a hailstorm, and the insurance company gives you a co-payee check for$1,500. You decide not to repair the car, and you take the check tothe co-payee, GMAC. GMAC states that the check will be applied tothe unpaid obligation, which is 36 remaining monthly payments of$150. (The GMAC financing plan reflects an effective interest rateof 12%). The GMAC plan for ($1,50/$150=10 payments). The GMACrecords indicate that the pay-off on your 12% loan is 4,516.12,before considering the $1,500 check. a. Would you accept GMAC’s plan? Why? b. What enhanced profit for GMAC, and lost benefit for you,would result from the GMAC plan? c. If GMAC would not consider any other approach that what theyhave proposed what would you do? . . .

 

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