Use estimation to select the best response. Do not calculate. Assume that there is an (unknown) interest rate that is charged. If you purchase an item for $3,600 and pay for it with monthly installments for 4 years, the monthly payment is ________.
A) $75 per month
B) less than $75 per month
C) $300 per month
D) more than $300 per month
E) more than $75 per month and less than $300 per month

Question

Quizplus · Accepted Answer

Assuming there is an interest rate, it is safe to estimate that the monthly payment will be more than $75 because $75 x 48 months (4 years) only gives a total payment of $3,600. However, it's unlikely that the interest rate will be low enough for the monthly payment to be as high as $300. So the best estimate for the monthly payment falls between $75 and $300, which is stated in option E.

Use Estimation to Select the Best Response