Question

Suppose you want to buy a car today. If you can afford payments of $164 per month and want to pay the loan back over the next 5 years. Assuming no down payment is required, how much can you borrow if the bank will charge you an annual percentage rate of 4% APR? (Work out the problem on a separate sheet of paper before entering the answer.) (Round up your answer to a whole number)

Answer 1

To determine how much you can borrow for a car loan, you can use the present value formula. Plugging in the values given in the question, the loan amount will be approximately $9,408.

Step-by-step explanation:

To determine how much you can borrow for a car loan, you can use the present value formula. The formula is given by:

Loan Amount = Monthly Payment * [1 - (1 + Interest Rate/12)^(-Total Number of Payments)] / (Interest Rate/12)

Plugging in the values given in the question, the loan amount will be approximately $9,408. Therefore, you can borrow up to $9,408 for a car loan.