Question

Chase plans to buy a new car and determines he can budget $725 monthly for four years. His bank is offering an 8 25% annual interest rate What is the maximum loan he can afford to stay in his budget? Use the formula, A = (p[(1 + r/n) ^ m - 1])/(1/n * (1 + r/n) ^ N) , where Pis the monthly payment, the annual interest rate, nis the number of times interest is compounded in one year and is the number of years.

Answer 1

$29555.20

Explanation:

Given that:

P = $725

r = 8.25% = 0.0825

n = 12

t = 4 years

From the given formula:

`A = \frac{P{(1+(r)/(n))^(n*t)-1 } }{(r)/(n)(1+ (r)/(n))^(nt)}}`

`A = \frac{725{(1+(0.0825)/(12))^(12*4)-1 } }{(0.0825)/(12)(1+ (0.0825)/(12))^(4* 12)}}`

`A = \frac{725{(1.3894-1 )} } { 0.006875 * 1.3894 }`

A = $29555.20