Question

Ryan wishes to purchase a new boat and can afford monthly payments of up to $300 per month. Finance is available, and the terms are that the loan lasts for 8 years and the annual interest rate is 11%. What is the maximum price for a boat that Ryan's budget can afford?

Round your answer to the nearest hundred dollars.
Do NOT round until you have calculated the final answer.

Answer 1

PV = PMT x [(1 - (1 + r/n)^(-nt)) / (r/n)]

Where:

PV is the present value of the loan (maximum price of the boat that Ryan can afford)

PMT is the monthly payment that Ryan can afford ($300)

r is the annual interest rate (11%)

n is the number of times interest is compounded per year (12, for monthly payments)

t is the number of years for the loan (8)

Plugging in the numbers, we get:

PV = $300 x [(1 - (1 + 0.11/12)^(-12*8)) / (0.11/12)]

PV = $24,598.82

Therefore, the maximum price for a boat that Ryan's budget can afford is $24,598.82, rounded to the nearest hundred dollars, is $24,600.

Explanation:

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