Jana has $1,500 for a down payment and thinks she can afford monthly payments of $300.If she can finance a vehicle with a 7 percent,4-year loan from a credit society,what is the maximum loan amount Jana can afford? (Round off the answer to nearest units place.)
A)$12,528
B)$14,208
C)$16,028
D)$17,900
E)$18,028

Question

Quizplus · Accepted Answer

The correct answer is A.The monthly payment for a 4-year loan with a 7% interest rate can be calculated using the formula:Monthly payment = (Loan amount * 0.07 / 12) * (1 + 0.07 / 12)^48 / ((1 + 0.07 / 12)^48 - 1)Substituting the given values, we get:Monthly payment = (Loan amount * 0.07 / 12) * (1 + 0.07 / 12)^48 / ((1 + 0.07 / 12)^48 - 1)Monthly payment = (Loan amount * 0.005833) * (1.005833)^48 / ((1.005833)^48 - 1)Monthly payment = (Loan amount * 0.005833) * 1.3439 / (1.3439 - 1)Monthly payment = (Loan amount * 0.005833) * 1.3439 / 0.3439Monthly payment = Loan amount * 0.017Since Jana can afford monthly payments of $300, the maximum loan amount she can afford is:Loan amount = Monthly payment / 0.017Loan amount = $300 / 0.017Loan amount = $17,647Rounding off to the nearest units place, the maximum loan amount Jana can afford is $17,647.

Jana Has $1,500 for a Down Payment and Thinks She