Jacinda Herschel wants to buy a car and determines she can afford to pay $403.62 a...

Jacinda Herschel wants to buy a car and determines she can afford to pay $403.62 a month for a 3 year loan. The rate on such a loan is 0.0321. How much money can Jacinda borrow?

Expert Solution

Number of periods = 3 * 12 = 36

Monthly rate = 0.0321 / 12 = 0.002675

Present value = payments * [1 - 1 / (1 + r)^n] / r

Present value = 403.62 * [1 - 1 / (1 + 0.002675)^36] / 0.002675

Present value = 403.62 * [1 - 0.908308] / 0.002675

Present value = 403.62 * 34.277274

Present value = $13,834.99

She can borrow $13,834.99

jeff jeffy answered 2 years ago

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