Problem
Sam can afford to spend $500 per month on a car. He figures he needs half of it for gas, parking, and insurance. He has been to the bank, and they will loan him 100% of the car's purchase price. (Note: If he had a down payment saved, then he could borrow at a lower rate.)
(a) If his loan is at a nominal 12% annual rate over 36 months, what is the most expensive car he can purchase?
(b) The car he likes costs $14,000 and the dealer will finance it over 60 months at 12%. Can he afford it? If not, for how many months will he need to save his $500 per month.
(c) What is the highest interest rate he can pay over 60 months and stay within his budget if he buys the $14,000 car now?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.