Final answer:
Borrower B, who pays $500 every two weeks, pays less interest overall compared to Borrower A, who pays $1,000 each month, because more frequent payments result in a faster reduction of the principal balance.
Step-by-step explanation:
The question compares the total interest paid by two borrowers who are repaying the same loan amount but with different payment frequencies. Borrower A makes a monthly payment of $1,000, while Borrower B pays $500 every two weeks. Given that there are 12 months in a year but 52 weeks, which means approximately 26 two-week intervals, Borrower B makes the equivalent of 13 monthly payments in a year. The more frequent payments by Borrower B result in less interest accrued because the principal balance upon which interest is calculated is reduced more frequently.
Therefore, the correct answer is: b) Borrower B pays less interest overall. Payment frequency does indeed affect the interest accumulated over the life of the loan due to the regular reduction of the outstanding principal balance.