Question

When you borrow money to buy a house or a car, you pay off the loan in monthly payments, but the interest is always accruing on the outstanding balance. This makes the determination of your monthly payme on a loan more complicated than you might expect. If you borrow P dollars at a monthly interest rate ofras decimal) and wish to pay off the note in months, then your monthly payment M = M(Prt) in dollars can be calculated using the following function Pr(+) ( 11 The above function can be rearranged to show the amount of moneyPAM b i n dollars that you can afford to borrow at a monthly interest rate of r a decimal of you are able to make monthly payments of dollars M Suppose you can afford to pay $400 per month for 2 years (a) How much money can you afford to borrow for the purchase of a car if the prevailing monthly interest rates 0.75% (Round your amount to two decimal places) (That is 9 APR) Express the answer in functional notation, and then calculate it (6) Suce your chi del canang i s monthly interested 25 APR). How much you ford to borrow now? (Round your answer to two decimal places) (c) Even at 3 APR you find yourself looking a car you can't afford, and you consider extending the period during which you are willing to make payments to 3 years. How much can you afford to borrow under these conditions (Round your answer to two decimal places.)

Answer 1

Given data that M- P4 (143157 Page 1 p= mx ax ('- Cinson) a) Integjest gjate is 0.45 m=250 t=5X12 = 60 month 9+0.45.4. = 0.0045 Plug in above values in the below formula: plmit no) = m( - Chto)+) P(250,60,0.0045) = 250 x 2048 (- 51.004560) ) 0.0075 = 250 0.0045 X0.3613 * $ 12043-23 b) Monthly Integjest is 0.25 8- 0.25 100 = 0.0025

plug in 91=0.0025 page 2 P(250,60,0.0025) - 250x moas (i-110025360) - | $13913.089) c) Given 3.3. APR 6 yeasts = 3.1 = 3 la X100 = 0.0025 t = 6X12 72 m=250 P(250, 7290.0025) - 250 XL 0.0025 1.002542 * [$10454 2144]