Mary wants to take out a loan. Suppose she can afford to make monthly payments of 100 dollars and the bank charges interest at an annual rate of 6 percent, compounded monthly. What is the maximum amount that Mary could afford to borrow if the loan is to be paid off eventually?

To be paid eventually it can borrow until 20,000 dollars.

Explanation:

We will calculate the present value of a 100 dollars monthly payment discounted at 6% annual rate compounded monthly.

the monthly rate will be the annual rate divided by 12 months within a year:

6% / 12 = 0.5% = 0.005

A perpetuity will be a payment wich only cover the interest:

100 / 0.005 = 20,000