Question

In: Finance

Jacob can only afford a payment of $500 per month for the new boat he plans...

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?

Solutions

Expert Solution

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


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