Question

47

(a) Sara buys a new car.
The cash price of the car is $4500.
She can pay for the car using option A or option B.

Option A
Pay of the cash price
5
then
12 monthly payments of $340

Option B
Pay 12% of the cash price
then
24 monthly payments of $195

Which option is cheaper and by how much?

Answer 1

To determine which option is cheaper, we need to calculate the total cost for each option and compare them.

Option A:

1. Pay the cash price upfront: $4,500

2. Make 12 monthly payments of $340: 12 * $340 = $4,080

Total cost for Option A = $4,500 (upfront) + $4,080 (monthly payments) = $8,580

Option B:

1. Pay 12% of the cash price: 0.12 * $4,500 = $540

2. Make 24 monthly payments of $195: 24 * $195 = $4,680

Total cost for Option B = $540 (12% upfront) + $4,680 (monthly payments) = $5,220

Now, let's compare the total costs:

Option A total cost: $8,580

Option B total cost: $5,220

Option B is cheaper by:

$8,580 - $5,220 = $3,360

So, Option B is cheaper by $3,360.

Explanation: