Some Lending Institutions Calculate the Monthly Payment M on a Loan

Some lending institutions calculate the monthly payment M on a loan of L dollars at an interest rate r (expressed as a decimal) by using the formula: $M = \frac { L r k } { 12 ( k - 1 ) }$ where k = [1 + ( r / 12 ) ] ^12t and t is the number of years that the loan is in effect. An automobile dealer offers customers no-down-payment 8-year loans at an interest rate of 10%. If a customer can afford to pay $122 per month, find the price of the most expensive car that can be purchased.

A) $ 8,050.00
B) $ 8,045.62
C) $ 8,039.98
D) $ 8,048.79
E) $ 8,029.63

Correct Answer:

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