Question

You can afford monthly car payments of $150 for five years at 7 percent. How do you compute the amount you can borrow? Multiple choice question. N = 5; I = 7/12; PMT = -150; FV = 0; CPT PV N = 60; I = 7; PMT = -150; FV = 0; CPT PV N = 60; I = 7/12; PMT = -150; PV = 0; CPT FV N = 60; I = 7/12; PMT = -150; FV = 0; CPT PV

Answer 1

Answer:

To compute the amount you can borrow, you would use the present value (PV) formula, given the parameters provided. The correct choice is:

N = 5; I = 7/12; PMT = -150; FV = 0; CPT PV

This choice correctly sets the number of periods (N) to 5 years, converts the annual interest rate (I) to a monthly rate (7/12), sets the monthly payment (PMT) to -$150 (negative because it's an outgoing payment), and sets the future value (FV) to 0 (since there's no balloon payment at the end). By solving for the present value (PV), you'll find the amount you can borrow to afford monthly car payments of $150 for five years at 7 percent interest.

Explanation: