Answer:
A. If the interest rate were 2.7%, the amount of the loan that Jade is considering would be more than $26,898.98
Explanation:
First the multiple option statements to complete the question..
A.If the interest rate were 2.7%, the amount of the loan that Jade is considering would be more than $26,898.98.
B.If the interest rate were 2.5%, the amount of the loan that Jade is considering would be less than $26,898.98.
C.If the interest rate were 2.3%, the amount of the loan that Jade is considering would be less than $26,898.98.
D.If the interest rate were 3.1%, the amount of the loan that Jade is considering would be more than $26,898.98.
To answer the question, we look at an extreme scenario of 0% interest rate and see the minimum repayment Jade will make on the loan taken
Therefore,
Interest Rate = 0%
This means that the loan to be paid will be calculated as follows
Monthly payments x 12 Months x 14 Years
= $195 x 12 months x 14 years = $32, 760
The meaning of this outcome is that the lower the interest rate to be paid, the higher the size of the loan, because at 2.9% the loan= $26,898.98 and at 0% rate the loan= $32, 760.
The conclusion therefore is a 2.7% interest rate which is lower than 2.9% but not as low as the extreme 0% will cause the loan amount to be higher than $26,898.98. This affirms option A.
Options B and C are wrong because 2.5% and 2.3% are lower than 2.9%, therefore, the loan amount will be higher. Option D is also wrong because a 3.1% interest rate is higher than 2.9%, therefore, the amount should be lower not higher than $26,898.98
