1. Christine has options to either buy a car for $18,500 with a $2,000 down payment and 8% interest, or lease a car with no down payment and $300 monthly payments for 5 years and then buy it for $8,000. 2. If Christine buys the car, her monthly payments would be $334.60. If she leases, she would pay a total of $26,000. Buying is $3,324 cheaper. 3. Christine and friends can afford a maximum $104,256.87 house with their $4,000 monthly income and $765 maximum mortgage payment based on their debt service ratios.

1. Personal Financing:
What shall I do?
Situation: Christine has finally got into University and will be
starting this coming fall. The only problem that she has is that she
lives all the way in West St. Paul, which is the opposite ends of the
city from the University. What is she going to do?

2. Option 1
Christine can buy a car that is worth $18,500.00
and put a down payment of $2000.00 with a loan
of 8% per annum compounded monthly and pays
it for the next five years.

3. Option 2
Christine can also lease the car with no down
payment and pay $300.00 per month for 5 years
and then purchase the car outright at it's lease
end value of $8000.00

4. Christine and three of her friends decided that they should
purchase a small home close to the university so they can either
walk or bus easily to school. She analysed their monthly income
and came up with $4000.00. The monthly property tax on the
house that they are looking at is approx. $423/year. The heating bill
is $92/month. With the three of them, they can manage a mortgage
rate of 8%. Together, all of them came up with a down payment of
$8000.00.
Option 3

5. Questions.
1. If Christine were to buy the car in option one, what would be her
monthly payment be?
2. What did she pay in total in option two?
3. Out of the first two option, which one will Christine pay the least
amount of money and by how much if she decides to get the car.
4. For option three, what is the maximum affordable purchase price
that can be considered if they take out a 30-year mortgage.

6. 1. If Christine were to buy the car in option one, what would be her
monthly payment be?
When you want to find out what is Christine's monthly payments
would be, then you would have to use the TVM solver from your
calculator to solve this.
But before we solve this you must know how to get there and
know what the different commands mean
CALCULATOR DEMANDS N is the number of payments being
Turn on your calculator. (Make sure that the home made.(# of years)(# times
screen is blank so you will be able to work on it and payments / year)
understand what you are doing) I is the Annual Interest rate (%)
PV is the present value
To get into your TVM Solver, you then must click the PMT is the payment being made
APPS button on your calculator. The applications on FV is the future value
your calculator should show up. P/Y is the number of payments per
year
What you want to do next is highlight the finance C/Y is the compounding periods
button and press enter. per year.
PMT: this depends when the
Once you press enter, your screen should pop up to payments are made each
this compounding period.
To solve for what ever you are looking
for, just press [ALPHA] [SOLVE]

7. 1. If Christine were to buy the car in option one, what would be her
monthly payment be?
To answer the question you would go to the TVM solver and enter these numbers.
N = (5 x 12) 60 18 500 – 2000 = 16 500 ( place this in the present value)
I%=8
PV = 16 500 Then Press [ ALPHA ] [SOLVE ]
PMT =
FV = 0
P/Y = 12
C/Y = 12
PMT = END
N = (5 x 12) 60
I%=8
PV = 16 500 The monthly payments
PMT = - 334.6
FV = 0
that Christine has to make
P/Y = 12 is $334.60
C/Y = 12
PMT = END

8. 2. What did she pay in total in option two?
Since Christine wants to pay $300.00 per month for
5 years,
You would have to multiply
300 x 60
This shows you how much you paid every month for
five years.
300 x 60 = $18 000
Christine then wanted to purchase the car at the
end of its lease.
The value is $8000.
So you take $18 000 + $8000 = $26 000
In total, Christine paid $26 000 just for leasing the car.

9. 3. Out of the first two option, which one will Christine pay the least
amount of money and by how much if she decides to get the car.
Option 1 =$ 344.60 x 60 + $2000
= $20 676 + 2000
= $22 676
Christine paid $22 676 to buy the car.
Option 2 = $26 000 to lease and then buy the car.
Finding the difference :
$26 000 - $ 22 676 = $3324
So you see that buying a car is cheaper than
leasing it.
Option 1 cost $3324.00 less than option 2.

10. 4. For option three, what is the maximum affordable purchase price that
can be considered if they take out a 30-year mortgage.
GDSR = Mo. Mortgage Pmt. + Mo. Heating Costs + 0.5 of Condo Strata Fees
Gross Monthly Income
This is the formula that is being used in this question.
What we know :
You should know $423 + $92 = $ 515
that GDSR is 32%. This only
0.32 = Mo. Mortgage Pmt. + $515 applies if you
Her and her friends $4000 plan on buying
have a monthly a condo.
income of $4000. 0.32($4000) -$515 = Mo. Mortgage Pmt.
The property tax is
$423 and the heating $765.00 = Monthly Mortgage Payment. (maximum)
bill is $92.
They can manage a
mortgage rate of 8%
And will be able to
put a $8000.00
payment.

11. Once you have found the maximum monthly
mortgage payment, then you can plug in the numbers
into your TVM Solve to find out what the maximum
amount that you can purchase on a home.
N = 360 N = 360
I%=8 [ALPHA] [SOLVE] I % = 8
PV = 0 PV = 104 256.873
PMT = - 765 PMT = -765
FV = 0 FV = 0
P/Y = 12 P/Y = 12
C/Y = 12 C/Y = 12
PMT = END PMT = END
The maximum amount that Christine and her
friends can afford on the house is $104 256.87

12. In the end after a lot of hard work and
thinking, Christine came to the
conclusion that if she were to get a car,
she would buy it than lease it.
When it came to thinking about buying
the house with the state she's in right
now, then she had to make sure that she
was getting a house with room mates.