Question

Aidan can afford $240 a month for five years for a car loan. If the interest rate is 8.5 percent, what is the most he can afford to borrow?

***I need to know how to solve this using a financial calculator please.

Answer 1

Aidan can borrow approximately $6,776.97 using a financial calculator.

Step-by-step explanation:

Here's how to solve this using a financial calculator:

Set the calculator to Loan Mode (sometimes labeled PV or PMT).

Enter the following values:

PV (Present Value): Leave this blank, as we're solving for the loan amount.

PMT (Payment): Enter 240 (monthly payment).

I/Y (Interest per Year): Enter 8.5 (annual interest rate).

N (Number of Periods): Enter 60 (5 years * 12 months/year).

FV (Future Value): Enter 0 (we don't care about the future value in this case).

Solve for PV: Press the "CPT" or "CALCULATE" button. The result will be the maximum loan amount Aidan can afford, which is approximately $6,776.97.

Therefore, using the financial calculator's Loan Mode and considering the given information, Aidan can borrow approximately $6,776.97 while staying within his budget of $240 monthly payments for five years, given the 8.5% annual interest rate.

Note: This calculation assumes the loan payment is constant throughout the five years. If the loan has additional fees or variable interest rates, the calculation might need adjustment.