Question

15. Ofir secides that he wants to purchase a "sweet ride" and decides to buy a 1995 Chevy Cavalier Station Wagon. Unfortunately, Ofir must finance $2500 at 6.5 % annually, compounded bi-weekly for 4 years. If Ofir can afford to make bi-weekly payments of $95, will he be able to buy his dream car? [4 marks]

Answer 1

Answer)

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

It is given that, ofir can afford an EMI of $95

Biweekly that is 26 times a year

So, P = amount financed = $2500

N = time = 4*26 = 104

R = 0.065/26

We need to estimate EMI here with 2500 as P and r = 0.065/26 and 104 n

EMI = [P*(0.065/26)*(1+(0.065/26)^104]/[(1+(0.065/26)^104 -1]

EMI = 27.328593033053

Which is less than 95

So, yes, he will be able to buy his dream car