Clair wants to purchase a new car. She knows that she can afford to pay $5720 pe
ID: 1174883 • Letter: C
Question
Clair wants to purchase a new car. She knows that she can afford to pay $5720 per year and that her bank will charge her 4.5% interest on the car loan. She intends to pay off the car in 12 years. Interest will be compounded annually. Of the following, which is the most expensive vehicle in her price range that she could consider? (HINT:&PV&of&Ordinary&Annuity.&Class&Slides&33)
a. A Taurus selling for $11,900
b. A Malibu selling for $10,808
c. A Civic selling for $10,274
d. A Celica selling for $11,596
Explanation / Answer
PMT = 5720, FV = 0, N = 12, rate = 4.5%
use PV funciton in Excel
max price = 52,158.28...all the options are lesser so she can opt for the most costly one
a. A Taurus selling for $11,900