A student has a job that leaves her with $500 per month in disposable income. Sh
ID: 1191474 • Letter: A
Question
A student has a job that leaves her with $500 per month in disposable income. She decides that she will use the money to buy a car. Before looking for a car, she arranges a 100% loan whose terms are $500 per month for 36 months at 15% annual interest. What is the maximum car purchase price that she can afford with her loan.
The student in the previous problem finds a car she likes and the dealer offers to arrange financing. His terms are 12% interest for 72 months and no down payment. The car's sticker price is $24,000. How expensive a car can she afford on the dealer's terms?
Explanation / Answer
a)Maximum car purchase price = 18000/(1.15)3 = $11835
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