Question

Larry is considering taking out a loan. He estimates that he can afford monthly payments of $265 for 10 years in order to support his loan. He finds that with an APR 5.5 compounded monthly he can take a loan of $24,418.05

Assuming that Larry’s monthly payment and the length of the loan remain fixed which of these statements is true about the size of the loan Larry could take if he received a different APR?

Answer 1

D

Explanation:

the guy above explained

Answer 2

option-C

option-D

Explanation:

we are given

He estimates that he can afford monthly payments of $265 for 10 years in order to support his loan

so, firstly we will find total amount

`A=265* 12* 10`

`A=31800`

now, we can verify each options

option-A:

r=6.6% =0.066

Amount is same

`A=31800`

now, we can use APR formula

`A=P(1+(r)/(n))^(nt)`

It is compounded monthly

so, n=12

we can plug it and then we can solve for P

`31800=P(1+(0.066)/(12))^(12* 10)`

`P=16465.6215`

we can see that it is less than 24418.05

So, this is FALSE

option-B:

r=6.2% =0.062

Amount is same

`A=31800`

now, we can use APR formula

`A=P(1+(r)/(n))^(nt)`

It is compounded monthly

so, n=12

we can plug it and then we can solve for P

`31800=P(1+(0.062)/(12))^(12* 10)`

`P=17133.96`

we can see that it is less than 24418.05

So, this is FALSE

option-C:

r=5.2% =0.052

Amount is same

`A=31800`

now, we can use APR formula

`A=P(1+(r)/(n))^(nt)`

It is compounded monthly

so, n=12

we can plug it and then we can solve for P

`31800=P(1+(0.052)/(12))^(12* 10)`

`P=18927.00451`

we can see that it is less than 24418.05

So, this is TRUE

option-D:

r=5.8% =0.058

Amount is same

`A=31800`

now, we can use APR formula

`A=P(1+(r)/(n))^(nt)`

It is compounded monthly

so, n=12

we can plug it and then we can solve for P

`31800=P(1+(0.058)/(12))^(12* 10)`

`P=17829.66`

we can see that it is less than 24418.05

So, this is TRUE