Question

Kaylee has $4,500 for a down payment and thinks she can afford monthly payments of $300. If he can finance a vehicle with a 7%, 4-year loan (assume a 0% tax rate), what is the maximum amount Kaylee can afford to spend on the car? [use the calculation in the text or the online calculators in the resource section]

Answer 1

$17,028.06

Explanation:

Given that :

Kaylee's down payment = $4500

monthly payment = $300

If he can finance a vehicle with a 7%, 4-year loan (assume a 0% tax rate).

the maximum amount Kaylee can afford to spend on the car is being calculated as the present value for all the payments.

=
`=\$4,500 +(\$300)/((1+(0.07)/(12))) + (\$300)/((1+(0.07)/(12))^2) +(\$300)/((1+(0.07)/(12))^3) + ....+ (\$300)/((1+(0.07)/(12))^(46))+ (\$300)/((1+(0.07)/(12))^(47))+ (\$300)/((1+(0.07)/(12))^(48))`

Using the online desmos calculator to determine the maximum amount Kaylee can afford to spend on the car; we have:

= $17,028.06