Langston knows he can make a car payment of $400 per month for the next 5 years. What is the maximum amount he can finance without exceeding his payment goal if interest rates are 3%?

Question

Business

Josiah Faulkner

5 April, 22:22

Langston knows he can make a car payment of $400 per month for the next 5 years. What is the maximum amount he can finance without exceeding his payment goal if interest rates are 3%?

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Answers (1)

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Maribel Stark · Answer 1

The maximum amount he can finance without exceeding his payment goal if interest rates are 3% is $160,000.

Explanation:

Assumption: There is no compounding effect as interest earned is paid as car payment and interest rate is 3% per year.

Monthly Outcome required = $400

Interest Rate = i = 3%

Number of Years = 5 years

Number of Months = 5 x 12 = 60 Months

Amount to be Finance = P = ?

Use Following formula to calculate the amount of Finance

Interest = P x (3% / 12)

$400 = P x (0.25%)

$400 / (0.25%) = P

P = $400 / 0.0025

P = $160,000

The maximum amount he can finance without exceeding his payment goal if interest rates are 3% is $160,000.