Question

The manager of Gloria's Boutique has approved Carla's application for 24 months of credit with maximum monthly payments of $70. If the APR is 14.2 percent, what is the maximum initial purchase that Carla can buy on credit?A) $1,006.90B) $1,300.00C) $1,455.08D) $1,184.75E) $1,228.46

Answer 1

Answer:

C) $1,455.08

Explanation:

Formula = M = [P (1 + r)^n * r] / [(1 + r)^n - 1]

Putting the figures in the formula =

$70 = P [(1 + 0.142/12)^24 * 0.142/12 ] / [(1 + 0.142/12)^24 - 1]

=> $70 = P (1.326209535) * 0.142/12 / 0.326209535

=> $70 = P * 0.0156934795 / 0.326209535

=> P = $1455.08

So, the maximum initial purchase that Carla can buy on credit = $1455.08