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Contact [7]
3 years ago
6

7. You have saved $4,000 for a down payment on a new car. The largest monthly payment you can affort is $350. The loan will have

a 12% APR based on end-of-month payments. What is the most expensive car you can affort if you finance it for 48 months? For 60 months?

Business
1 answer:
nordsb [41]3 years ago
8 0

Answer:

$13,290.89  and $15,734.26

Explanation:

In this question we have to use the Present value function which is shown on the attachment below:

In the first case

Provided that

Future value = $0

Rate of interest = 12%  ÷ 12 months = 1%

NPER = 48 months

PMT = $350

The formula is shown below:

= PV(Rate;NPER;PMT;FV;type)

So, after solving this, the present value is $13,290.89

In the second case

Provided that

Future value = $0

Rate of interest = 12%  ÷ 12 months = 1%

NPER = 60 months

PMT = $350

The formula is shown below:

= PV(Rate;NPER;PMT;FV;type)

So, after solving this, the present value is $15,734.26

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Payback period is the amount of time that it will take a project to pay back or recuperate the initial investment in the project.

This project is making $8,600 a year and had an initial investment of $25,000.

The Payback period is;

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= 25,000 / 8,600

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