Question

If Sandy can afford car payments of ​$260 per month for 3 ​years, what is the price of a car that she can afford​ now? Assume an interest rate of 7.8 percent.

Answer 1

To get the type of car that Sandy can afford after 3 years, we find the future annuity of the his yearly deposits.
amount deposited  by Sandy in a month is $260
amount deposited per year=260*12=$3120
time=3years
rate=7.8%

Fv of annuity= P[(1+r)^n-1]/r
substituting our values we get
Fv=3120[(1+0,078)^3-1]/0.078
=10109.06208
The value of a car he can drive is $10109.06208