Question

PLEASE HELP QUICK

Lilo wants to take out a bank loan to start a small business selling Elvis collectibles. She will borrow $10,000 at a 4% interest rate per year. She can select to make her interest payments weekly, monthly or quarterly. Which of these options would be most advantageous for Lilo? A Weekly 8 Monthly C Quarterly D All of these options result in the same amount of money paid.​

Answer 1

Explanation:

The option that would be most advantageous for Lilo would be to make her interest payments weekly.

This is because making payments more frequently can reduce the overall interest paid on the loan because interest is calculated based on the outstanding balance of the loan. By making payments more frequently, the outstanding balance is reduced faster, resulting in less interest being charged.

Assuming a standard 52-week year, the weekly interest payment on $10,000 at a 4% rate is $7.69. The total annual interest paid would be $399.88.

If Lilo chose to make monthly payments, the interest rate would remain the same, but the total annual interest paid would be slightly higher due to the interest being calculated over a longer period of time. The monthly interest payment would be $33.33 and the total annual interest paid would be $400.

If Lilo chose to make quarterly payments, the interest would still be calculated based on the outstanding balance, but the longer intervals between payments would result in a higher overall interest cost. The quarterly interest payment would be $100 and the total annual interest paid would be $400.

Therefore, making interest payments weekly would result in the lowest overall interest cost for Lilo.