Tom wants to buy a car. He figures he has $200.00 a month to spend on loan payments. The bank's current new car loans are 5.2% for 5 years. Find the amount he can afford to borrow.

Question

Tom wants to buy a car.  He figures he has $200.00 a month to spend on loan payments.  The bank's current new car loans are 5.2% for 5 years.  Find the amount he can afford to borrow.

Reiny · Answer

Assuming the normally for monthly payments the interest would be compounded monthly i = .052/12 = .0043333... n = 5*12 = 60 200( 1 - 1.0043333...^-60)/.0043333.. = PV PV = $10,546.85