Question

Madeline wants to borrow $20,000. Her bank offers a 7.1% interest rate. She can afford $500 a month for loan payments. What should be the length of her loan to the nearest tenth of a year?

a. 3.2 years
b. 4.5 years
c. 5.7 years
d. 2.8 years

Answer 1

The answer is b. 4.5 years.

Step-by-step explanation:

To find the length of Madeline's loan, we can use the formula for the monthly payment of a loan:

Monthly Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-Number of Months))

Plugging in the given values, we have:

$500 = (20000 * 0.071) / (1 - (1 + 0.071)^(-Number of Months))

By solving this equation, we find that the length of Madeline's loan is approximately 4.5 years. So, the answer is b. 4.5 years.