Question

You can afford a $ 1,168 per month car payment. You've found a 27 year loan at 3 % interest. How big of a loan can you afford?$____________ (Round to the nearest DOLLAR)

Answer 1

Given,

per month car payment cost, P=$1,168

The rate of interest is 3%p.m.

Total year t=27

The present amount is calculated by:

`A=P\lbrack1-(1)/((1+r)^n)\rbrack(1)/(r)`

Here r is

`r=(3)/(12*100)=0.0025`

Putting the values,

`A=1168\lbrack1-(1)/((1+0.0025)^(12))\rbrack(1)/(0.0025)=259152`

Thus he would receive a loan of $259152