Question

Yvette is considering taking out a loan with a principal of $16,200 from one of two banks. Bank F charges an interest rate of 5.7%, compounded monthly, and requires that the loan be paid off in eight years. Bank G charges an interest rate of 6.2%, compounded monthly, and requires that the loan be paid off in seven years. How would you recommend that Yvette choose her loan?

Answer 1

B

Step-by-step explanation:

Answer 2

Yvette should choose Bank F’s loan if she wants more about lower monthly payments, and she should choose Bank G’s loan if she wants more about the lowest lifetime cost.

These are the calculations for each bank.

BANK F:
Annual Payments=$210.53
Total Interest=$4,011.13

BANK G:
Annual Payments=$238.21
Total Interest=$3,810.05