Sam can afford to spend $500 per month on a car. He figures he needs half of it for gas, parking, and insurance. He has been to the bank, and they will loan him 100% of the car's purchase price. 

(a) If his loan is at a nominal 12% annual rate over 3 years, what is the most expensive car he can purchase? 

(b) The car he likes costs $14,000 and the dealer will finance it over 60 months at 12%. Can he afford it? 

(c)  (Sub-question (b) continues) If not, then he needs to put a down payment to reduce the required monthly repayment. How many months will he need to save the down payment with his $500 per month? 

(d) If he buys the car priced at $14,000 now, what is the highest interest rate he can afford to pay it off over 60 months and stay with his budget?

Answer rating: 100% (QA)

A Monthly payment 500 Interest rate 12 Time 3 years 36 months Maximum a... View the full answer