1. Susan and Geoffrey currently have gross monthly income of $5,000 per month. Their taxes and withholdings run $1,500 per month. Their monthly debt payments are currently running $200 per month. They are thinking about purchasing a new car and don't want to put themselves under too much financial stress. They are asking you for advice on their options.
They ended up buying a new car and borrowed $17,000 for 60 months at 3.5 percent APR. It turns out that they can comfortably afford to pay $375 per month. How many months would it take to pay off this loan?
a) 48.69 months
b) 63.50 months
c) 45.20 months
d) 39.75 months
2. Suppose you have gross monthly income of $5,000 per month and determine that you can comfortably afford a car payment of $300 per month for 72 months at 4.25 percent interest, how much will you be able to borrow for a new car?.
a) $16,306.27
b) $6,051.35
c) $19,036.32
d) $20,251.56