Question

Eloise gets a student loan for $20,000 at 6.8% interest for 5 years. She makes monthly payments of 394.14. Terrence gets a student loan for 20,000 at 6.8% interest for 10 years. He makes monthly payments of $230.16. Which of the following statements is true?

A: Terrance will end up paying $3,970.80 more for his education costs than Eloise will for hers

B: Terrence will end up paying $163.98 more for his education costs than Eloise will for hers

C: Terrance will end up paying $163.98 less for his education costs than Eloise will for hers

D:Terrance will end up paying $3,970.80 less for his education costs than Eloise will for hers.

Answer 1

Answer: Choice A

Terrance will end up paying $3,970.80 more for his education costs than Eloise will for hers

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Step-by-step explanation:

The information about the interest rates will not be used here because we already know the monthly payments.

Eloise pays $394.14 per month, for 60 months (aka 5 years), so she pays back a total of 394.14*60 = 23648.40 dollars. We'll use this value later, so let A = 23648.40

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Terrance pays $230.16 per month, for 120 months (aka 10 years), so he pays back a total of 230.16*120 = 27619.20 dollars. Since we'll use this later, let B = 27619.20

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Subtract the values of A and B (larger minus smaller)

C = difference in total payments

C = B - A

C = 27619.20 - 23648.40

C = 3970.80

Since B is larger than A, this means Terrance pays $3,970.80 more compared to Eloise.