Final answer:
The 6-year loan at 4.6% APR is the better option as it results in a lower total amount paid.
Step-by-step explanation:
To determine which loan option is better, we need to calculate the total amount paid for each loan. Let's start with a 5-year loan at 5.7% APR. To calculate the total amount paid, we can use the formula:
Total Amount Paid = Principal + Interest
Using this formula, for the 5-year loan, the total amount paid would be:
- Principal = $5000
- Interest = Principal * Rate * Time
- Interest = $5000 * 0.057 * 5
- Interest = $1425
- Total Amount Paid = $5000 + $1425 = $6425
Now let's calculate the total amount paid for a 6-year loan at 4.6% APR:
- Principal = $5000
- Interest = Principal * Rate * Time
- Interest = $5000 * 0.046 * 6
- Interest = $1380
- Total Amount Paid = $5000 + $1380 = $6380
Therefore, the 6-year loan at 4.6% APR is the better option, as it results in a lower total amount paid of $6380.