Question

Esme earns a net salary of $2,400 per month. She already has a savings account that has $100 in it. After paying her expenses every month, she'll be able to add $100 to her savings account. Esme also plans to purchase a car priced at $20,000 using a no-interest loan. She will make a $300 payment on the loan every month. In how many months will Esme have enough money saved to pay off her loan completely?

Answer 1

She will be able to pay off her loan completely in approximately 50 months

Explanation:

The amount Esme earns as net salary = $2,400

The amount she already has in a savings account = $100

The amount she would be able to add to her savings account every month = $100

The cost of the car Esme plans to purchase on the no interest loan, A = $20,000

The amount she will make as payment on the loan every month, P = $300 per month

Let 'x' represent the number of month Esme will be able to pay off her loan completely, we have

The number of month Esme will have enough money to pay off her loan completely is given by the following equation;

20,000 = 100 + 300 × x + 100 × x = 100 + 400·x

∴ x = (20,000 - 100)/400 = 49.75

Therefore, the number of months she will be able to pay off her loan completely = 49.75 months ≈ 50 months.