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3 years ago

Compare Loan Terms

Business

1 answer:

antoniya [11.8K]3 years ago

7 0

Answer:

- Interest rate on 2years loan term is $435.6

- Interest rate on 5years loan term is $1,452

Explanation:

Using the formula for calculating amount

Amount = Principal + Interest

Simple Interest = Principal × Rate × Time/100

To finance a car for $4,840 at a 4.5% interest rate on a 2-year loan,

Principal = $4,840

Rate = 4.5%

Time = 2years

SI = 4840×4.5×2/100

SI = 43560/100

SI = $435.6

Interest rate on 2years loan term is $435.6

Amount after 2years loan term will give $4840+$435.6

= $5,275.6

Monthly cost = $5,275.76/24

Monthly cost of car = $219.82

b) To finance the same car of $4,840 at a 6% interest rate on a 5-year loan,

SI = 4840×6×5/100

SI = 145200/100

SI = $1,452

Interest rate on 5years loan term is $1,452

Total cost by loan term = $4840+$1452

= $6,292

Monthly cost of car = $6,292/5×12

Monthly cost of car = $104.87

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