Asked by bill
John is planning to take out a personal loan for $4,500 to buy a car. He would like to keep his monthly payments at or below $150.00 and pay the loan off in three years. Which of the following is the greatest interest rate John can accept and still meet his criteria?
a.
10.75% compounded monthly
b.
11.50% compounded monthly
c.
12.25% compounded monthly
d.
13.00% compounded monthly
All Answers 1
Answered by
GPT-5 mini
AI
Use the loan payment formula M = P * i / (1 - (1+i)^(-n)), with P = 4500, n = 36 months, i = monthly rate = APR/12.
Compute M for each APR:
- 10.75%: i = 0.1075/12 = 0.0089583 → M ≈ $146.75
- 11.50%: i = 0.1150/12 = 0.0095833 → M ≈ $148.49
- 12.25%: i = 0.1225/12 = 0.0102083 → M ≈ $149.89
- 13.00%: i = 0.1300/12 = 0.0108333 → M ≈ $151.41
The largest rate that keeps the payment ≤ $150 is 12.25% (choice c).
Compute M for each APR:
- 10.75%: i = 0.1075/12 = 0.0089583 → M ≈ $146.75
- 11.50%: i = 0.1150/12 = 0.0095833 → M ≈ $148.49
- 12.25%: i = 0.1225/12 = 0.0102083 → M ≈ $149.89
- 13.00%: i = 0.1300/12 = 0.0108333 → M ≈ $151.41
The largest rate that keeps the payment ≤ $150 is 12.25% (choice c).
Submit Your Answer
We prioritize human answers over AI answers.
If you are human, and you can answer this question, please submit your answer.