Answer:
The quarterly compounding is more profitable
Explanation:
We will compare the total payment under monthly payment to that under quarterly payment and the choose the higher one.
This is done as follows:
Monthly interest = 9.1%/12 = 0.758
number of months =15 × 12 = 180
Monthly payment = ( 1-1.00758^(-180))/0.00758=98.04
Total payment = 98.04 × 180 =17,647.31
Quarterly compounding
Quarterly interest rate = (9.3%/12)×3 = 2.325 %
number of quarter = 4×15 = 60
Quarterly payment = (1-1.002325^(-60))/0.002325= 374.17
Total payment = 374.17× 60 = $22,449.91
The quarterly compounding produces total repayment a higher than the monthly. Hence, the quarterly repayment is more profitable
