Question

You want to buy a new car. You can afford payments of $300 per month and can borrow the money at an annual interest rate of 5.5% compounded monthly for 5 years. How much are you able to borrow? $ How much interest do you pay? $

Answer 1

ans a)	How much are you able to borrow
	We have to use financial calculator to solve this
	put in calcualtor
	FV		0
	PMT		-300
	I	5.5%/12	0.4583%
	N	5*12	60
	Compute PV		$15,705.85
	Ability to borrow =	$15,705.85
ans b)	Amount of interest paid
	we have to compute the future value
	put in calculator
	PV		$0.00
	PMT		-300
	I		0.4583%
	N		60
	Compute FV		$20,664.25
	Interest =		$4,958.40
	22664.25-15705.58
	answer =		$4,958.40