The manager of Gloria's Boutique has approved Carla's application for 24 months of credit with maximum monthly payments of $70. If the APR is 14.2 percent, what is the maximum initial purchase that Carla can buy on credit? A) $1,006.90B) $1,300.00C) $1,455.08D) $1,184.75E) $1,228.46

Question

Reese Fitzpatrick

Business

31 July, 05:38

The manager of Gloria's Boutique has approved Carla's application for 24 months of credit with maximum monthly payments of $70. If the APR is 14.2 percent, what is the maximum initial purchase that Carla can buy on credit? A) $1,006.90B) $1,300.00C) $1,455.08D) $1,184.75E) $1,228.46

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Answers (1)

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Nadia Freeman · Answer 1

C) $1,455.08

Explanation:

Formula = M = [P (1 + r) ^n * r] / [ (1 + r) ^n - 1]

Putting the figures in the formula =

$70 = P [ (1 + 0.142/12) ^24 * 0.142/12 ] / [ (1 + 0.142/12) ^24 - 1]

=> $70 = P (1.326209535) * 0.142/12 / 0.326209535

=> $70 = P * 0.0156934795 / 0.326209535

=> P = $1455.08

So, the maximum initial purchase that Carla can buy on credit = $1455.08