Answer:
He can afford the monthly payment of the Ford car since his accumulated interest after 5 years is greater than the amount the Ford will cost
Step-by-step explanation:
For the Ford
There are 60 months in 5 years so the total amount he will be paying is 60 * 299 = $17,940
For the Volkswagen, amount to pay will be 60 * 389 = $23,340
Now to see the payment he can afford, let’s calculate the amount he will have in his savings
We shall use the formula for compound interest here
A = I(1 + r/n)^nt
where A is the amount after the
number of years
I is the initial amount = 17,000
r is the rate = 3.3% = 3.3/100 = 0.033
n is the
number of times interest is compounded per year = 12
t = number of years = 5
plugging these values we have
A = 17,000(1 + 0.033/12)^12(5)
A = 17,000( 1.00275)^60
A = $20,045
This shows he can afford the Ford
