Financial Maths, STD2 EQ-Bank 17

Lisa has a net annual salary of $78 000. She pays $1250 each month in rent and has regular bills that amount to $3800 each year. Lisa estimates that, each month, food costs her $580, entertainment is $320 and other expenses are $2850.

How much will Lisa save each year? (2 marks)
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Lisa is considering taking out a loan to buy a car. Repayments will be $450 each month. Will she be able to afford the repayments? Justify your answer. (2 marks)
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Show Answers Only

a. $$14\,200$

b. $\text{Yes, Lisa can afford the repayments as she currently saves}$

$$14 200\text{ per year and the car loan would cost }$5400$

$\text{per year, leaving her savings of}\ $8 800.$

Show Worked Solution

a. $\text{Calculate total annual expenses:}$

$\text{Rent} =1250\times 12=$15\,000\ \text{per year}$

$\text{Regular bills} =$3800\ \text{per year}$

$\text{Food} =580\times 12= \$6960\ \text{per year}$

$\text{Entertainment} =320\times 12= \$3840\ \text{per year}$

$\text{Other expenses} =2850\times 12= \$34\,200\ \text{per year}$

$\text{Total annual expenses}=15\,000+3800+6960+3840+34\,200=$63\,800$

$\therefore\ \text{Annual savings}=78\,000-63\,800=$14\,200$

b. $\text{Car loan repayments} =450\times 12=$5400\ \text{per year}$

$\text{Current annual savings} =$14\,200$

$\text{Since} =$5400<$14\,200,\ \text{Lisa can afford the car repayments.}$

$\text{After car repayments, Lisa would still save:}\ 14200-5400= \$8800\ \text{per year}$