Question

2.
Logan is taking out a loan to buy a $4,000 ring for his girlfriend. He has the two finance options listed
below. Which option should he choose? Justify your answer by giving the amount of money Logan will
save.
Option A - A five year loan with a 7% interest rate compounded quarterly.
Option B - An eight year loan with a 5.5% interest rate compounded annually.​

Answer 1

Answer:

Option A.

Explanation:

You would use the equation $A = P(1+\frac{r}{n}) ^{nt}$. A is your final value, r is the interest rate (0.07 for the 7% interest rate), n is how many times it is compounded annually, and t is the amount of years. (edit) I forgot to clarify that P is the starting value, which is $4000 in this case.

Compare the two final values, Option A is $5659.11, Option B is $6138.75.

Option A is correct because it is cheaper.

Answer 2

A is the answer have a great day