I 1) Suppose that you want to purchase a car today. You can afford payments of $
ID: 2802297 • Letter: I
Question
I 1) Suppose that you want to purchase a car today. You can afford payments of $400 per morn and want to pay the loan back over the next five years. Assuming no down payment is required. how much can you borrow if the bank will charge you an annual percentage rate of 12% compounded monthly? A) $16,726.68 B) $18,220.18 C) $24,667.87 D) $25,008.90 E) $17,982.02 12) Sly's Used Cars just sold you a clunker (you need it to get to class on time). You $4,728.48 purchase price for 24 months. They said your payment would be 3450.W rate did they charge you (assume monthly compounding)? A) 10% B) 12% C) 16% D) 19% E) 24% 13) Jah-Malya can afford a car payment of $400 per month for 48 months at an annual rate of 8.25 percent interest. Which of the following is closest to the amount she will be able to borrow for a new car? A) $16,306 B) $4,741 C) $22,656 D) $12,997 14) You have $5,000 in a 36 month Certificate of Deposit that has an APR of 3.75%. If inflation averages 4.25% during these 36 months, what is the real return on your CD? A) 3.75 percent B) 8.0 percent C) Negative .50 percent D) Negative 8.0 percentExplanation / Answer
Answer 11.
Monthly Payment = $400
Annual Interest Rate = 12%
Monthly Interest Rate = 1%
Period of Loan = 60 month or 5 years
Amount borrowed = $400 * PVIFA (1%, 60)
Amount borrowed = $400 * (1 - (1 / 1.01)^60) / 0.01
Amount borrowed = $400 * 44.95504
Amount borrowed = $17,982.02
Answer 12.
Amount borrowed = $4,728.48
Period of Finance = 24 months
Monthly Payment = $250
Using financial calculator, where
N = 24, PV = 4728.48, PMT = 250, I = 2
So, Monthly interest rate = 2%
Annual interest rate = 12 * 2%
Annual interest rate = 24%
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