Question

URGENT!! I NEED HELP ASAP NOT ROCKY

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 3 years, and the annual interest rate is 12%. What is the maximum price for a boat that Ryan's budget can afford? Round your answer to the nearest hundred dollars.

Answer 1

• $9000

Explanation:

Given

• Monthly payment P = $300
• Time t = 3 years = 36 months
• Number of payments n = 36
• Interest rate r = 12% PA = 1% per month = 0.01 times

Use loan payment formula:

• P = r(PV) / (1 - (1 + r)⁻ⁿ),
• where P- monthly payment, PV - present value (amount of the loan), r -rate of interest, n- number of payments

Substitute values and solve for PV:

• 300 = (0.01*PV) / (1 - (1 + 0.01)⁻³⁶)
• PV = 300*(1 - 1.01⁻³⁶ )/ 0.01
• PV = 9032.25 ≈ $9000 (rounded to the nearest hundred dollars)