You have saved $3000 for a down payment on a new car. The largest monthly payment you can afford is...

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You have saved $3000 for a down payment on a new car. The largest monthly payment you can afford is $450. The loan would have a 12% APR based on the end of month payments. What is the most expensive car you could afford if you finance it for 48 months? for 60 months?

Robert · Accepted Answer

It is apparent that the maximum monthly payment is $ 450.  
Also, APR = 12% pa 
Consider financing period = 48 months 
Hence, PVA= PMT*(1-(1/((1+r)^t))/r
PVA= 450*(1-(1/((1+(.12/12))^(48))/(.12/12) = $ 17,088.28 
Hence, maximum value of car = Installments present value + Downpayment = 17,088.

You have saved $3000 for a down payment on a new car. The largest monthly payment you can afford is $450. The loan would have a 12% APR based on the end of month payments. What is the most expensive...

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