Matthew wants to take out a loan to buy a car.He calculates that he can make repayments of $4000 per year.If he can get a five-year loan with an interest rate of 7.5%,what is the maximum price he can pay for the car?
A)$16,184
B)$18,243
C)$20,324
D)$21,674
E)$20,000

Question

Quizplus · Accepted Answer

The maximum price Matthew can pay for the car is $16,184. This is calculated using the formula:Loan amount = (Repayment amount * (1 - (1 + interest rate)^-number of years)) / interest rateIn this case, the repayment amount is $4000, the interest rate is 7.5%, and the number of years is 5. Plugging these values into the formula, we get:Loan amount = (4000 * (1 - (1 + 0.075)^-5)) / 0.075= (4000 * (1 - 0.6830)) / 0.075= (4000 * 0.3170) / 0.075= 16,184

Matthew Wants to Take Out a Loan to Buy a Car.He