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3 June, 05:10

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.

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  1. 3 June, 05:30
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    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
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