In: Finance
Susan is able to pay $300 a month for 4 years on a car loan. If the interest rate is 4.8% per year, how much can she afford to borrow to buy a car?
Group of answer choices
$13,078.27
$12,824.95
$15,840.49
$15,470.38
a.$13,078.27.
amount she can borrow can be known using present value annuity formula;
A*[ 1- (1+r)^(-n)]/r
here,
A= $300
r = 4.8% per year
=>4.8% *1/12
=>0.4% per month
=>0.004.
n=4 years *12 months
=48 months.
=>300*[1-(1.004)^(-48)]/0.004
=>300*43.59425
=>$13,078.27.