Problem 5-26. PV and loan eligibility You have saved $5,000 for a down payment o

Question

Problem 5-26. PV and loan eligibility
You have saved $5,000 for a down payment on a new car. The largest monthly payment you can afford is $350. The loan would have a 10% APR (with interest compounded monthly) based on end-of-month payments.
NOTE: The tolerance for the correct answer is very small (if your answer is not within one cent of the correct answer, it will be counted wrong). When entering interest rates in your calculations, you should not round them at all. Enter as many digits for the interest rate as possible to ensure your calculation will be precise enough to be counted as correct. I recommend that you wait to complete this question until we have covered some of the "interest rate variations" in class.

a. What is the most expensive car you could afford if you finance it for 48 months? Round your answer to the nearest cent.

b. For 60 months? Round your answer to the nearest cent.

Explanation / Answer

Formula is R= iAp/(1-(1+i)^(-n)) Here i= .10/12 Ap= $4650 n=48 R= .10/12 *4650/[1-(1+.10/12)^(-48)] R= $117.94 monthly payment If n=60 we have $98.80

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.