A 60 month car loan (where no down payment was made)with a 6% interest rate and a monthly payment of $500 would allow the borrower to buy a

Question

Quizplus · Accepted Answer

We can use the formula for present value of an annuity to find the maximum car price that can be financed with the given monthly payment and interest rate over a 60 month period:

PV = Payment * [1 - (1 + r)^(-n)] / r

where PV is the present value (maximum car price), Payment is the monthly payment ($500), r is the interest rate per month (6%/12 = 0.5%), and n is the number of periods (60).

Plugging in the values, we get:

PV = $500 * [1 - (1 + 0.005)^(-60)] / 0.005
PV = $25,862.84

Therefore, the maximum car price that can be financed with a 60 month car loan of $500 per month at 6% interest rate is $25,863. This means that option C) is the best choice.

A 60 Month Car Loan (Where No Down Payment Was