Todd is able to pay $230 a month for four years for a car. If the interest rate is 5.9%, how much can Todd afford to borrow to buy a car?

Question

Quizplus · Accepted Answer

The correct answer is A because the formula for calculating the amount that can be borrowed is:Loan Amount = Monthly Payment * (1 - (1 + (Interest Rate / 12)) ^ (-12 * Number of Years)))Plugging in the given values, we get:Loan Amount = $230 * (1 - (1 + (0.059 / 12)) ^ (-12 * 4))Loan Amount = $230 * (1 - (1.004917) ^ (-48))Loan Amount = $230 * (1 - 0.862612)Loan Amount = $230 * 0.137388Loan Amount = $9,812.62

Todd Is Able to Pay $230 a Month for Four