If Sandy can afford car payments of $260 per month for 3 years, what is the price of a car that she can afford now? Assume an interest rate of 7.8 percent.

To get the type of car that Sandy can afford after 3 years, we find the future annuity of the his yearly deposits.

amount deposited by Sandy in a month is $260

amount deposited per year=260*12=$3120

time=3years

rate=7.8%

Fv of annuity = P[ (1+r) ^n-1]/r

substituting our values we get

Fv=3120[ (1+0,078) ^3-1]/0.078

=10109.06208

The value of a car he can drive is $10109.06208