Question

You have saved $5,000 for a down payment on a new car. The largest monthly payment...

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.
$  

Homework Answers

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
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