Question

i am trying to figure out whether i can afford to have a mid-life crisis and buy a $25,000 motorcycle. i have the ability to put a $5000 down-payment, can afford up to $750 per month, and can obtain a loan for 28 months at 6.98% (monthly compounded). will i be able to afford the motorcycle for my midlife crisis?

Answer 1

To determine if you can afford the motorcycle, calculate the monthly payment based on the loan information provided and compare it to your available budget. Unfortunately, based on the calculations, you will not be able to afford the motorcycle for your midlife crisis. Consider your budget and financial limitations before making major purchases.

Step-by-step explanation:

To determine if you can afford the motorcycle, we will calculate the monthly payment amount based on the loan information you provided. First, convert the annual interest rate to a monthly rate: 6.98% / 12 = 0.582%.

Using this monthly interest rate, we can calculate the monthly payment using the formula for a fixed-rate amortizing loan:

P = (r * PV) / (1 - (1 + r)^(-n)), where P is the monthly payment, r is the monthly interest rate, PV is the loan amount (cost of the motorcycle minus down payment), and n is the number of months.

Let's plug in the values: PV = $25,000 - $5,000 = $20,000, r = 0.582%, and n = 28. By substituting these values into the formula and solving for P, the monthly payment will be approximately $819.82.

Since you can afford up to $750 per month, you will not be able to afford the motorcycle for your midlife crisis. It is important to consider your budget and financial limitations before making major purchases.