Question

Chuck can afford a $490-per-month car payment, and he's interested in either

a convertible, which costs $28,700, or a sports car, which costs $29,200. If he
is being offered a 6-year car loan with an APR of 6%, compounded monthly
which car can Chuck afford?

A. Chuck can afford the sports car but not the convertible

B. Chuck can afford neither the convertible nor the sports car

C. Chuck can afford the convertible but not the sports car

D. Chuck can afford both the convertible and the sports car​

Answer 1

D.) He can afford either car.

Explanation:

Answer 2

Option D is correct.

Explanation:

EMI formula is :

`(p*r*(1+r)^(n) )/((1+r)^(n)-1 )`

Calculation for convertible car:

p = $28700

r = 6/12/100=0.005

n =
`6*12=72` months

Putting the values in formula we get

`(28700*0.005(1.005)^(72) )/((1.005)^(72)-1 )`

= $475.67

Calculation for sports car:

p = 29200

r = 6/12/100=0.005

n =
`6*12=72` months

Putting the values in formula we get

`(29200*0.005(1.005)^(72) )/((1.005)^(72)-1 )`

= $483.96

We can see that in both cases the EMI is below $490.

As Chuck can afford a $490-per-month car payment. So, he can afford both cars. (one car out of both)

Therefore, option D is correct. Chuck can afford both the convertible and the sports car​.