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Suppose you want to buy a car. You’re willing to make monthly car payments of $350...

Suppose you want to buy a car. You’re willing to make monthly car payments of $350 for 5 years. If the interest rate is 12% per year, how much can you afford to borrow (to the nearest dollar)?

A. $15734

B. $18472

C. $21000

D. $28584

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Answer #1

Monthly Payment = $350

Time Period = 60 months

Interest Rate = 12%

Calculating Present Value,

Using TVM Calculation,

PV = [FV = 0, PMT = 350, N = 60, I = 0.12/12]

PV = $15,734

Amount Borrowed = $15,734

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