The manager of Gloria's Boutique has approved Carla's application for credit.The maximum payment that has been approved is $65 a month for 24 months.The APR is 15.7 percent.What is the maximum initial purchase that Carla can make given this credit approval?

Question

Quizplus · Accepted Answer

We can use the formula for calculating the maximum initial purchase amount with a fixed monthly payment and APR:

Max initial purchase = Monthly payment x ((1 - (1 + APR/12)^(-number of months))) / (APR/12)

Plugging in the given values, we get:

Max initial purchase = $65 x ((1 - (1 + 0.157/12)^(-24))) / (0.157/12) ≈ $1,331.42

Therefore, the best choice is C, as it is the closest option to our calculated value. The other options are either too low or too high.

The Manager of Gloria's Boutique Has Approved Carla's Application for Credit.The