What is the maximum amount can spend on a car

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Your friend Carol has asked you to help her out as she is developing her financial plan. Help her come up with a plan for her finances and how she can set herself up for financial success!

She has an after tax income of $48,000 and budgets $30,000 for necessary expenses. This leaves $18,000 to spend on debt and savings annually. (Assume all annuity payments are in the form of ordinary annuities.)

Question 1: Carol has a current balance of $20,000 on her credit card. She has a minimum monthly payment of $500 and an APR of 17.25% (divide by 12 to get the monthly rate). How many months will it take Carol to pay off her credit card debt?

Question 2: Suppose Carol would like to purchase a new car. She believes she can spend $550 a month on a car. She has been approved for a 4.50% loan (divide by 12 for monthly rate) for 36 months. What is the maximum amount she can spend on a car as not to exceed her $550 a month budget?

Reference no: EM133010689

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