The following table shows your monthly payment P, in dollars, if you pay off a loan in months.

Which formula below fits these data?
A) $P = \frac { 5193 } { t }$
B) $P = \frac { 51.93 \times 1.01 ^ { t } } { 1.01 ^ { t} - 1 }$
C) $P = \frac { 5193 \times ( 1.01 ) ^ { t } } { t - 1.01 }$
D) None of the above

Question

The following table shows your monthly payment P, in dollars, if you pay off a loan in  months.

Which formula below fits these data?
A) $P = \frac { 5193 } { t }$ 
B) $P = \frac { 51.93 \times 1.01 ^ { t } } { 1.01 ^ { t} - 1 }$ 
C) $P = \frac { 5193 \times ( 1.01 ) ^ { t } } { t - 1.01 }$ 
D) None of the above

Quizplus · Accepted Answer

The formula for monthly payment on a loan with a fixed interest rate and fixed term is given by:
P = (rPv)/(1 - (1+r)^-n)
where r is the monthly interest rate, Pv is the present value (amount borrowed), and n is the number of monthly payments. 
In this case, we don't have enough information to directly calculate r or Pv, but we can use the formula provided as an approximation. 
Option B matches this formula with a monthly interest rate of 1%, a present value of $5193, and n = 11. Therefore, it is the best choice for this scenario.

The Following Table Shows Your Monthly Payment P, in Dollars P=5193tP = \frac { 5193 } { t }P=t5193​

The Following Table Shows Your Monthly Payment P, in Dollars $P = \frac { 5193 } { t }$