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

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

andromache andromache · Answer 2 · 2022-03-03T13:50:21+01:00

The amount that should be borrowed for the new car is option A) $16,306

Calculation of the borrowed amount

Since there is the car payment of $400 per month for 48 months at the rate of interest 8.25% on annual basis.

So, Here we need to find to apply the present value of the annuity

Present value of annuity=Per month payment [1-(1+monthly interest rate)^-number of months/monthly interest rate]

So,

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

= $16,306.27

Therefore, The amount that should be borrowed for the new car is option A) $16,306

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