Question

$666 per month for a new car. The current market rate for car loans is 1 percent per month for 48 months. How much can you borrow? Round to the nearest penny.

Answer 1

To determine the loan amount, use the formula for the present value of an ordinary annuity. In this case, you can borrow approximately $27,417.48.

Step-by-step explanation:

To determine how much you can borrow, you need to calculate the loan amount based on the monthly payment and the interest rate. In this case, the monthly payment is $666 and the interest rate is 1% per month.

We can use the formula for the present value of an ordinary annuity to find the loan amount:

Loan Amount = Monthly Payment * (1 - (1 + Interest Rate)^(-Number of Periods))) / Interest Rate

Substituting the given values into the formula, we have:

Loan Amount = $666 * (1 - (1 + 0.01)^(-48)) / 0.01

Simplifying the equation, we find that the loan amount is approximately $27,417.48.

Therefore, you can borrow approximately $27,417.48.