Suppose that you decide to borrow $17.000 for a new car. You can select one of t

Question

Suppose that you decide to borrow $17.000 for a new car. You can select one of the following amortized loans. each requiring regular monthly payments. Installment Loan A: three-year loan at 5.5% Installment Loan B: five-year loan at 7.2% Complete parts a. through c. below. Find the monthly payments and the total interest for Loan A. The monthly payment for Loan A is $. (Do not round until the final answer. Then round to the nearest cent as needed.) The total interest for Loan A is $. (Round to the nearest cent as needed.) Find the monthly payments and the total interest for Loan B. The monthly payment for Loan B is $. (Do not round until the final answer Then round to the nearest cent as needed.) The total interest for Loan B is $. (Round to the nearest cent as needed.) Compare the monthly payments and the total interest for the two loans. Determine which loan is more economical. Choose the correct answer below. The three-year loan at 5.5% is more economical. T

Explanation / Answer

=PMT(0.00458,36,17000,0,0) = 513.30

total amount paid interest + principal = 513.30*36 = 18478.79

Interest Paid = 18478.79 - 17000 = 1478.79

Option 2

Per month payment

=PMT(0.006,60,17000,0,0) = 338.23

total amount paid = 338.23*60 = 20293.61

Interest paid = 20293.61 - 17000 = 3293.61

Three year is more economical = 1478.79 - 3293.61 = 1814.82 he can save by adopting option 1

Per month installment

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.