Question

Jacob can only afford a payment of $500 per month for the new boat he plans to purchase for himself. He qualifies for a 5-year loan with 1.75% APR. What is the maximum purchase price he can afford?

Answer 1

	Monthly rate(M)=	yearly rate/12=	0.15%	Monthly payment=	500.00
Month	Beginning balance (A)	Monthly payment	Interest = M*A	Principal paid	Ending balance
1	28704.93	500.00	41.86	458.14	28246.80
2	28246.80	500.00	41.19	458.81	27787.99
3	27787.99	500.00	40.52	459.48	27328.51
4	27328.51	500.00	39.85	460.15	26868.37
5	26868.37	500.00	39.18	460.82	26407.55
6	26407.55	500.00	38.51	461.49	25946.06
7	25946.06	500.00	37.84	462.16	25483.90
8	25483.90	500.00	37.16	462.84	25021.06
9	25021.06	500.00	36.49	463.51	24557.55
10	24557.55	500.00	35.81	464.19	24093.37
11	24093.37	500.00	35.14	464.86	23628.50
12	23628.50	500.00	34.46	465.54	23162.96
13	23162.96	500.00	33.78	466.22	22696.74
14	22696.74	500.00	33.10	466.90	22229.84
15	22229.84	500.00	32.42	467.58	21762.26
16	21762.26	500.00	31.74	468.26	21293.99
17	21293.99	500.00	31.05	468.95	20825.05
18	20825.05	500.00	30.37	469.63	20355.42
19	20355.42	500.00	29.68	470.32	19885.10
20	19885.10	500.00	29.00	471.00	19414.10
21	19414.10	500.00	28.31	471.69	18942.41
22	18942.41	500.00	27.62	472.38	18470.04
23	18470.04	500.00	26.94	473.06	17996.97
24	17996.97	500.00	26.25	473.75	17523.22
25	17523.22	500.00	25.55	474.45	17048.77
26	17048.77	500.00	24.86	475.14	16573.64
27	16573.64	500.00	24.17	475.83	16097.81
28	16097.81	500.00	23.48	476.52	15621.28
29	15621.28	500.00	22.78	477.22	15144.06
30	15144.06	500.00	22.09	477.91	14666.15
31	14666.15	500.00	21.39	478.61	14187.54
32	14187.54	500.00	20.69	479.31	13708.23
33	13708.23	500.00	19.99	480.01	13228.22
34	13228.22	500.00	19.29	480.71	12747.51
35	12747.51	500.00	18.59	481.41	12266.10
36	12266.10	500.00	17.89	482.11	11783.99
37	11783.99	500.00	17.18	482.82	11301.17
38	11301.17	500.00	16.48	483.52	10817.65
39	10817.65	500.00	15.78	484.22	10333.43
40	10333.43	500.00	15.07	484.93	9848.50
41	9848.50	500.00	14.36	485.64	9362.86
42	9362.86	500.00	13.65	486.35	8876.52
43	8876.52	500.00	12.94	487.06	8389.46
44	8389.46	500.00	12.23	487.77	7901.70
45	7901.70	500.00	11.52	488.48	7413.22
46	7413.22	500.00	10.81	489.19	6924.03
47	6924.03	500.00	10.10	489.90	6434.13
48	6434.13	500.00	9.38	490.62	5943.51
49	5943.51	500.00	8.67	491.33	5452.18
50	5452.18	500.00	7.95	492.05	4960.13
51	4960.13	500.00	7.23	492.77	4467.36
52	4467.36	500.00	6.51	493.49	3973.88
53	3973.88	500.00	5.80	494.20	3479.67
54	3479.67	500.00	5.07	494.93	2984.75
55	2984.75	500.00	4.35	495.65	2489.10
56	2489.10	500.00	3.63	496.37	1992.73
57	1992.73	500.00	2.91	497.09	1495.64
58	1495.64	500.00	2.18	497.82	997.82
59	997.82	500.00	1.46	498.54	499.27
60	499.27	500.00	0.73	499.27	0.00

Where

Interest paid = Beginning balance * Monthly interest rate

Principal = Monthly payment – interest paid

Ending balance = beginning balance – principal paid

Beginning balance = previous Month ending balance

he can afford 28704.93