Texas Instruments TI-82 User Manual - Page 199

Buying a Car, Now or Later?

Page 199 highlights

Buying a Car, Now or Later? You have identified the car you would like to buy, which costs 8,000. You can afford payments of 250 per month. You can either borrow the money at 10% annual interest (compounded monthly) and buy the car now, or invest the payments at 6% and pay cash for the car later. How long will it take to pay for the car each way? Procedure 1. Press z. Select the default MODE settings. Press y [STAT PLOT] and turn off all stat plots. 2. On the Home screen, store the values of the periodic interest rates. .06à12!Z .10à12!J 3. Press o. Turn off all functions and enter the formula to describe investing the money. Y2=250((1+Z)^X-1)àZ 4. Enter the formula to describe making car payments. Y3=8000-250(1-(1+J)^MX)àJ 5. To determine how many months will be required to pay cash, press y ãQUITä to return to the Home screen. Solve the equation (the amount saved less 8000) for X, using 36 months as the guess. (solve( is on the MATH MATH menu.) solve(Y2-8000,X,36) 6. To determine how long it will take to pay off the loan, enter: solve(Y3,X,36) 7. To calculate how much you would pay in total if you got a loan, press ¯ 250, which multiplies the months to pay off the loan (in Ans) by the payment amount. 8. Press y ãTABLEä to examine the amount saved versus the amount still owed for each time period. 9. Press p. Set the viewing WINDOW. Xmin = 0 Xmax = 47 Xscl = 12 Ymin = 0 Ymax = 8000 Yscl = 1000 10. Press r to examine the amounts graphically. Applications 14-5

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Applications
14-5
Buying a Car, Now or Later?
You have identified the car you would like to buy, which costs 8,000. You can
afford payments of 250 per month. You can either borrow the money at 10%
annual interest (compounded monthly) and buy the car now, or invest the
payments at 6% and pay cash for the car later. How long will it take to pay for the
car each way?
Procedure
1.
Press
z
. Select the default
MODE
settings. Press
y
[
STAT PLOT
]
and turn off all stat plots.
2.
On the Home screen, store the values of the periodic interest rates.
.06
à
12
!
Z
.10
à
12
!
J
3.
Press
o
. Turn off all functions and enter the formula to describe
investing the money.
Y
2
=250((1+
Z
)^X–1)
àZ
4.
Enter the formula to describe making car payments.
Y
3
=8000–250(1–(1+J)^
M
X)
à
J
5.
To determine how many months will be required to pay cash, press
y
ã
QUIT
ä
to return to the Home screen. Solve the equation (the amount
saved less 8000) for
X
, using 36 months as the guess. (
solve(
is on the
MATH MATH
menu.)
solve(Y
2
–8000,X,36)
6.
To determine how long it will take to pay off the loan, enter:
solve(Y
3
,X,36)
7.
To calculate how much you would pay in total if you got a loan, press
¯
250
, which multiplies the months to pay off the loan (in
Ans
) by the
payment amount.
8.
Press
y
ã
TABLE
ä
to examine the amount saved versus the amount still
owed for each time period.
9.
Press
p
. Set the viewing
WINDOW
.
Xmin = 0
Ymin = 0
Xmax = 47
Ymax = 8000
Xscl = 12
Yscl = 1000
10. Press
r
to examine the amounts graphically.