Question

Bill wants to buy an F150 with a sticker price of $55,000.00 The dealer will make a 4 year loan at 3.5% annual interest loan on the

a. Yes, Bill thinks he can pay $1,200 a month. Can bill afford the truck?
b. Yes, Bill can afford exactly a $55.000.00 truck
c. No, Bill can afford only a truck worth about $53,676 Yes, Bill can afford a truck worth about $55,928
d. No, Bill can only afford a truck worth about 154812

Answer 1

By calculating the monthly payment required for a $55,000 loan at a 3.5% annual interest rate over a 4-year term, it was determined that the monthly payment is less than $1,200. So, Bill can indeed afford the truck.

Step-by-step explanation:

To determine if Bill can afford a new truck with a sticker price of $55,000 on a 4-year loan at 3.5% annual interest rate, we must calculate the monthly payments required to pay off the loan within the term and compare it to the $1,200 amount Bill is prepared to pay monthly.

Loan Calculation Details:

Principal amount (P) = $55,000

Annual interest rate (r) = 3.5%

Loan term (t) = 4 years

Monthly interest rate = 3.5% / 12

Number of monthly payments (n) = 4 years * 12 months/year

To calculate the monthly payment (M), we use the formula for an installment loan:

M = P * r * (1 + r)^n / ((1 + r)^n - 1)

After substituting the values into the formula and calculating, we find that the monthly payment is less than $1,200. Therefore:

Bill can afford the $55,000 truck.