To calculate the loan amount $P$ you can afford, we will use the formula for the present value of an annuity:

$P = \frac{PMT \times \left( 1 - (1 + \frac{r}{n})^{-nt} \right)}{\frac{r}{n}}$

Where:

• $PMT$ is the monthly payment ($200),
• $r$ is the annual interest rate (2.5% or 0.025),
• $n$ is the number of times the interest is compounded per year (12 for monthly),
• $t$ is the duration of the loan in years (4 years).

Now, let's calculate the loan amount $P$.The loan amount you can afford is approximately $9,126.57.

Would you like further details or have any questions?

Here are 5 related questions:

1. How would the loan amount change if the interest rate were higher?
2. What would happen if you opted for a 5-year loan instead of 4 years?
3. How does compound interest differ from simple interest in loans?
4. How do extra payments impact the total interest paid on a loan?
5. What factors should be considered when choosing a loan term?

Tip: Lowering the interest rate or extending the loan term can increase the loan amount you can afford, but it may result in paying more interest over time.