Answer:
You can afford a car worth $29,399.05
Explanation:
Step 1
Determine the present value of the car using the expression below;
Present value=total monthly payments+down payment
where;
total monthly payments=monthly payments+number of months
monthly payments=$440
number of months in 4 years=4×12=48 months
replacing;
total monthly payments=(440×48)=$21,120
total monthly payments in 4 years=$21,120
down payment=$1,100
replacing;
Present value=(1,100+21,120)=$22,220
Step 2
Determine the future value by the expression below;
F.V=P.V(1+r)^n
where;
F.V=future value
P.V=present value=$22,220
r=annual interest rate=7.25%=7.25/100=0.0725
n=4 years
replacing;
F.V=22,220(1+0.0725)^4
F.V=22,220(1.0725)^4
F.V=$29,399.05
You can afford a car worth $29,399.05
