Question

If Sandy can afford car payments of $260 per month for 7 years, what is the price of a car she can afford now? Assume an interest rate of 6.6%.

Any help is appreciated :)

Answer 1

Total Amount = (Monthly Payment)*(Number of months in a year)*(# of years)

Total Amount = (260)*(12)*(7)

Total Amount = 21,840


So the amount she can afford is 21,840. This is the amount of the original value of the car + interest



Assuming we're talking about simple interest, then we use the formula.

A = P(1 + rt)


So plug in A = 21840, r = 0.066, and t = 7 and solve for P


21840 = P(1 + 0.066*7)

21840 = P(1.462)

21840/1.462 = P

P = 14,938.440492476

P = 14,938.44

So she can afford a $14,938.44 car.

Answer 2

Thanks you so much :)

Answer 3

np

Answer 4

I assume you know the Present value formula to apply for annuity payment type!