Question

Mr cadwell wants to purchase a motorcycle. he has financing options a and b to chose from, as shown below.

Option A-
Down Payment: $1,000
Monthly payment for 3 years: $85

Option B-
Down payment: $1,200
Monthly Payment for 3 years: $85

The purchase of the motorcycle is $3,500, including tax. Based on the info provided in the table, which statement is true?

Option B is better
Option A is better

Answer 1

Option A is better.

Explanation:

We will observe both plans one by one to determine which one is better i.e. which one will has less interest to pay.

So,

Option A:

Down Payment: $1,000

Monthly payment for 3 years: $85

The total amount in installments will be:

`=Amount\ per\ month * months\\= 85*36\\=3060`

The total price of bike will be:

`Total\ price = Downpayment +Installments\\= 1000+3060\\= 4060\\Interest = Total\ price - Purchase \\= 4060-3500\\=560`

Option B:

Down Payment: $1,200

Monthly payment for 3 years: $85

The total amount in installments will be:

`=Amount\ per\ month * months\\= 85*36\\=3060`

The total price of bike will be:

`Total\ price = Downpayment +Installments\\= 1200+3060\\= 4260\\Interest = Total\ price - Purchase \\= 4260-3500\\=760`

We can see that interest in Option A is less than interest in Option B that means Mr. Cardwell will have to pay less amount in Option A.

Hence,

Option A is better.