If you are willing to spend 500 on interest and need a loan

If you are willing to spend $500 on interest and need a loan for an 18 month period, How much principal can you afford at 6%?

Solution

Here r = 6 % (if it is yearly )

t = 1.5 years

I_max = $ 500

I = P*r*t   

P_max = I / (r*t )

= 500 / ( 0.06*1.5)

= $ 5555.555

you can afford $ 5555.555   at 6%.