Question

Yvette is considering taking out a loan with a principal of $16,200 from one of two banks. Bank F charges an interest rate of 5.7%, compounded monthly, and requires that the loan be paid off in eight years. Bank G charges an interest rate of 6.2%, compounded monthly, and requires that the loan be paid off in seven years. How would you recommend that Yvette choose her loan?

Answer 1

Your answer is vette should choose Bank F’s loan if she cares more about lower monthly payments, and she should choose Bank G’s loan if she cares more about the lowest lifetime cost.

Answer 2

a.Bank F offers a better loan in every regard, so Yvette should choose it over Bank G’s.
b.Yvette should choose Bank F’s loan if she cares more about lower monthly payments, and she should choose Bank G’s loan if she cares more about the lowest lifetime cost.
c.Yvette should choose Bank G’s loan if she cares more about lower monthly payments, and she should choose Bank F’s loan if she cares more about the lowest lifetime cost.
d.Bank G offers a better loan in every regard, so Yvette should choose it over Bank F’s.

The answer is B