We can afford to make payments of $350 per month for four years. What is the largest amount of a loan we can get at an APR of 5%? a. $15,198
b. $11,253
c. $6327
d. $16,800

The correct option is a. $15,198.

Explanation:

This can be calculated using the formula for calculating the present value of an ordinary annuity as follows:

PV = P * ((1 - (1 / (1 + r))^n) / r) …………………………………. (1)

Where;

PV = Present value of the loan or the largest loan amount that can be gotten =?

P = Monthly payment = $350

r = Monthly interest rate = APR / 12 = 5% / 12 = 0.05 / 12 = 0.00416666666666667

n = number of months = 4 years * 12 months = 48

Substitute the values into equation (1) to have:

PV = $350 * ((1 - (1 / (1 + 0.00416666666666667))^48) / 0.00416666666666667)

PV = $350 * 43.4229559379367

PV = $15,198.0345782779

Rounding to a whole dollar amount, we have:

PV = $15,198

Therefore, the correct option is a. $15,198.

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