Annuity Values. You want to buy a new car, but you can make an initial payment of

Question:

Annuity Values. You want to buy a new car, but you can make an initial payment of only

$2,000 and can afford monthly payments of at most $400.

a. If the APR on auto loans is 12 percent and you finance the purchase over 48 months, what is the maximum price you can pay for the car?

b. How much can you afford if you finance the purchase over 60 months?

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JAPHETH KOGEI

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