Question

g after examining the various personal loan rates available to​ you, you find that you can borrow funds from a finance company at an APR of percent compounded or from a bank at an APR of percent compounded . Which alternative is more​ attractive? a. If you borrow ​$ from a finance company at an APR of percent compounded for ​year, how much do you need to payoff the​ loan?

Answer 1

question text WITH missing information:

After examining the various personal loan rates available to you, you find that you can borrow funds from a finance company at an APR of 12 percent compounded monthly or from a bank at an APR of 13 percent compounded annually. Which alternative is more attractive?

If you borrow ​$100 from a finance company at an APR of 9% percent compounded for ​year, how much do you need to payoff the​ loan?

Answer:

The finance company option is better as we are taking the loan we want the lower rate possible.

We need $109 to payoff the loan of $100 at 9% annualy after a whole year.

Explanation:

We solve for the effective rate of 12% compounded monthly

$(1+\frac{0.12}{12} )^{12}$ = 1.12682503 = 0.126825 = 12.6825%

As this rate is lower than 13% this option is better

If we take 100 dollars after a year we have to pay:

$100 x (1 + r) = 100 x (1 + 0.09) = 100 x 1.09 = $109