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20 March, 01:31

You are looking to buy a car. You can afford $440 in monthly payments for four years. In addition to the loan, you can make a $1,100 down payment. If interest rates are 7.25 percent APR, what price of car can you afford (loan plus down payment) ? (Do not round intermediate calculations and round your final answer to 2 decimal places.).

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  1. 20 March, 01:42
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    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
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