Question

Bank A offers you a 480 loan which you must repay in 3 months. Bank B offers you an 850 loan which you must repay in 5 months. Which loan has the lowest monthly payment?

Bank A's loan has the lowest monthly payment.
Bank B's loan has the lowest monthly payment.
Each bank's loan has equal monthly payments.
Neither bank will accept monthly payments.

Answer 1

After dividing the total loan amount by the number of months over which it must be repaid, Bank A's loan has a lower monthly payment of $160 compared to Bank B's monthly payment of $170.

Step-by-step explanation:

To determine which loan has the lowest monthly payment, we need to calculate the total payment for each loan and then divide by the number of months over which the loan must be repaid. For Bank A, the loan is for $480 to be repaid over 3 months. Simple division gives us a monthly payment of $480 / 3 = $160 per month.

For Bank B, the loan is for $850 which is to be repaid over 5 months. Again, simple division yields $850 / 5 = $170 per month.

Comparing the two, we see that Bank A's loan results in a lower monthly payment of $160, compared to Bank B's $170 per month, making Bank A's loan the one with the lowest monthly payment.