Some Lending Institutions Calculate the Monthly Payment M on a Loan

question 104

Multiple Choice

Some lending institutions calculate the monthly payment M on a loan of L dollars at an interest rate r (expressed as a decimal) by using the formula: where k = [1 + ( r / 12 ) ] ^12t and t is the number of years that the loan is in effect. An automobile dealer offers customers no-down-payment 4-year loans at an interest rate of 15%. If a customer can afford to pay $229 per month, find the price of the most expensive car that can be purchased.

• A)$ 8,238.33
• B)$ 8,237.12
• C)$ 8,228.31
• D)$ 8,233.95
• E)$ 8,217.96

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Definitions:

Negative Earnings

A financial situation where a company's expenses exceed its revenues, leading to a net loss in its income statement.

Prop Up Earnings

Tactics used by companies to artificially inflate or support their reported earnings per share (EPS) without a real increase in profitability.

Slightly Positive

Referring to a modestly favorable outcome or result, often used in the context of financial results or economic indicators.

Capacity Swaps

Capacity swaps involve the exchange of production capacity or output between companies, usually to meet demand or manage surplus without the exchange of monetary payment.