ABC Company is considering the purchase of a new equipment. The company can borr

Question

ABC Company is considering the purchase of a new equipment. The company can borrow $200,000 at Option 1: 5% per year compound interest Option 2: 5.5% per year simple interest. The company has to pay the total amount due in a single payment at the end of 3 years Match the following questions with the closest correct answers from the given list Wha t is the total amount to be paid in Option 1 A $234,848 B Option1 C. $231,525 D $33,000 E. Option 2 F. $72,767.52 What is the total interest to be paid in Option 2? ? |which option is better? What is the total amount to be paid in Option 27 G $233,000 Moving to another question will save this response

Explanation / Answer

A.

Total amount to be paid in option 1 = 200000*(1+5%)^3

Total amount to be paid in option 1 = $231525 (C)

B.

Total interest to be paid in option 2 = 200000*5.5%*3

Total interest to be paid in option 2 = $33000 (D)

C.

Option 1 is better, because there is payment of $231525 only, in comparison to the total payment of $233000 in option 2. (B)

D.

Total amount to be paid in option 2 = 200000 + 33000

Total amount to be paid in option 2 = $233000 (G)

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