Answer:
The maximum amount he can finance without exceeding his payment goal if interest rates are 3% is $160,000.
Explanation:
Assumption: There is no compounding effect as interest earned is paid as car payment and interest rate is 3% per year.
Monthly Outcome required = $400
Interest Rate = i = 3%
Number of Years = 5 years
Number of Months = 5 x 12 = 60 Months
Amount to be Finance = P = ?
Use Following formula to calculate the amount of Finance
Interest = P x ( 3% / 12 )
$400 = P x ( 0.25% )
$400 / (0.25% ) = P
P = $400 / 0.0025
P = $160,000
The maximum amount he can finance without exceeding his payment goal if interest rates are 3% is $160,000.
