Question

Charlene can afford car payments of $185 a month for 48 months. If the interest rate is 5.65 percent, how much money can she afford to borrow?

Answer 1

Answer:

The correct answer is $7931.44.

Explanation:

According to the given scenario, the given data are as follows:

Payments ( PMT ) = $185 per month

Time period ( N )= 48 months

Interest rate (R ) = 5.65%

So, we can calculate the present value she can borrow by using following formula:

Present value = PMT [ $\frac{1-\frac{1}{(1+r)^{n} } }{r}$ ]

= $185 [ $\frac{1 - \frac{1}{1+0.004708^{48} } }{0.004708}$ ]

= $185 [ 42.872 ]

= $7931.44

Hence, the correct answer is $7931.44