SOLUTION: You can afford a $200 per month car payment. You've found a 5 year loan at 2% interest. How big of a loan can you afford?
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-> SOLUTION: You can afford a $200 per month car payment. You've found a 5 year loan at 2% interest. How big of a loan can you afford?
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L = loan amount
P = payment per month = 200
i = interest rate per month = 0.02/12 = 0.00166667 approximately
n = number of months = 12*5 = 60
L = P*(1-(1+i)^(-n))/i ....... present value of annuity formula
L = 200*(1-(1+0.00166667)^(-60))/0.00166667
L = 11,410.4699873413
L = 11,410.47
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