Question

You have saved $5,000 for a down payment on a new car. The largest monthly payment you can afford is $450. The loan will have a 9% APR based on end-of-month payments.

What is the most expensive car you can afford if you finance it for 48 months? Do not round intermediate calculations. Round your answer to the nearest cent.
$  

What is the most expensive car you can afford if you finance it for 60 months? Do not round intermediate calculations. Round your answer to the nearest cent.
$  

Answer 1

Ans 1) $ 23083.15

P =	Regular Payments
PV =	Loan Amount
r =	rate of interest
n =	no of periods
P =	r (PV)
	1 - (1 + r )^-n
450 =	(9%/12)*PV
	1 - (1 / (1 + 9%/12)^48))
450 =	0.0075 * PV
	0.301385864138850
PV =	450 / 0.0075 * 0.30138586413885
PV =	18083.15
COST OF CAR =	LOAN AMOUNT + DOWNPAYMENT
	18083.15 + 5000
	23083.15

Ans 2) $ 26678.02

P =	r (PV)
	1 - (1 + r )^-n
450 =	(9%/12)*PV
	1 - (1 / (1 + 9%/12)^60))
450 =	0.0075 * PV
	0.361300301407231
PV =	450 / 0.0075 * 0.361300301407231
PV =	21678.02
COST OF CAR =	LOAN AMOUNT + DOWNPAYMENT
	21678.02 + 5000
	26678.02