Final answer:
To calculate the amount that can be borrowed, use the formula for the present value of an annuity: Present Value = Payment * (1 - (1+r)^(-n)) / r. Plugging in the given values, the amount that can be borrowed is approximately $16,180.92.
Step-by-step explanation:
To calculate the amount that can be borrowed, we can use the formula for the present value of an annuity:
Present Value = Payment * (1 - (1+r)^(-n)) / r
Where Payment is the monthly payment, r is the monthly interest rate, and n is the number of payments.
In this case, the payment is $300, the annual interest rate is 5.1%, and the loan term is 5 years (60 monthly payments).
First, we need to convert the annual interest rate to a monthly rate by dividing it by 12 (12 months in a year). So the monthly interest rate is 5.1%/12 = 0.425% or 0.00425.
Using the formula, we can calculate the present value:
Present Value = $300 * (1 - (1+0.00425)^(-60)) / 0.00425
Calculating this expression, we find that the present value is approximately $16,180.92.
Therefore, you can borrow approximately $16,180.92 (option b).