Answer: $12,918.95
Step-by-step explanation
The monthly payment formula is
P = (L*i)/( 1-(1+i)^(-n) )
where,
- P = monthly payment
- L = loan amount
- i = interest rate per month in decimal form
- n = number of months
In this case:
- P = 150
- L = unknown and what we want to solve for
- i = 0.07/12 = 0.00583333333333 = approximately
- n = 10*12 = 120 months
Let's plug those values into the formula and isolate L.
P = (L*i)/( 1-(1+i)^(-n) )
150 = (L*0.00583333333333)/( 1-(1+0.00583333333333)^(-120) )
150 = L*0.01161084792187
L = 150/0.01161084792187
L = 12,918.9531211981
L = 12,918.95
The most expensive car you can afford is $12,918.95