Some Lending Institutions Calculate the Monthly Payment M on a Loan

Multiple Choice

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: 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 7-year loans at an interest rate of 7%. If a customer can afford to pay $108 per month, find the price of the most expensive car that can be purchased.

A) $ 7,145.44
B) $ 7,155.79
C) $ 7,161.43
D) $ 7,165.81
E) $ 7,164.60