Question

You have saved $4,000 for a down payment on a new car. The largest monthly payment you can afford is $300. The loan would have a 9% APR based on end-of-monthpayments.

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

Answer 1

You need to make at least $1500 a month, and sometimes up to $2000, before any lender will give you a loan for any amount.
In your situation, you should buy the best $4K vehicle you can find

Answer 2

You have saved $4,000 for a down payment on a new car. The largest monthly payment you can afford is $300. The loan would havea 9% APR based on end-of-month payments.

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

By definition, the amount of the loan must equal the present value of our loan payments.

In other words, we want to take out the amount of money that our car costs!

So we have:

(1.09⁴⁸)($300) + $4000 = $22,775.57

Note that we added $4,000 that's already been saved!

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

Same idea:

(1.09⁶⁰)($300) + $4000 =$56,809.39

I hope that you found this answer useful towards your studies. It took a considerable amount of thought, time, and effort tocompose, and and I'd sincerely appreciate a lifesaver rating! It would really make my day! :)

Answer 3

assuming a 48 month loan

N = 48

I/Y = 9/1

PMT = -300

FV =0