Final answer:
The student can take out a loan of $31,500 for the car. After three years, the principal remaining will be $38,115.
Step-by-step explanation:
To calculate the largest loan you can take out, you need to determine the total price of the car first. Since the bank requires a 10% down payment, you can use the formula:
Down payment = 10% of the total price
$3,500 = 0.10 * total price (divide both sides by 0.10)
Total price = $3,500 / 0.10 = $35,000
Therefore, the largest loan you can take out is the total price minus the down payment:
Largest loan = $35,000 - $3,500 = $31,500.
To determine how much principal will remain after three years, you can use the formula for simple interest:
Principal after n years = Principal * (1 + interest rate * n)
Plugging in the values, we have:
Principal after 3 years = $31,500 * (1 + 0.07 * 3) = $31,500 * 1.21 = $38,115.