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30 September, 01:33

Jah-Malya can afford a car payment of $400 per month for 48 months at an annual rate of 8.25 percent interest. Which of the following is closest to the amount she will be able to borrow for a new car? A) $16,306 B) $4,741 C) $22,656 D) $12,997

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  1. 30 September, 03:54
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    A) $16,306

    Explanation:

    The amount that should be borrowed by the Jah-Malya for car payment shall be determined through the present value of annuity formula which is given as follow:

    Present value of annuity=R[1 - (1+i) ^-n/i]

    In the given question

    R=Payment per month=$400

    i=Interest rate per month=8.25%/12=0.6875%

    n=number of payments involved=48

    Present value of annuity=$400[1 - (1+0.6875%) ^-48/0.6875%]

    = $16,306.27

    So based on the above calculations, the answer is A) $16,306
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