Question

Lamar is considering two loans.


Loan A
Loan B
Principal
$4,500
$4,300
Interest rate
5%
6%
Time in years
3
3

Which loan will have the lowest total payback?

Answer 1

Step-by-step explanation:

know:

Loan A

Principal

$4500

Interest rate

5%

Time in years

3

If 100% => $4500

5% =>X

X = 5% × $4500 ÷ 100% = $225

Loan A = $4500 + $225 = $4725

Loan B

Principal

$4300

Interest

6%

Time in years

3

If 100% => $4300

6% =>X

X = 6% × $4300 ÷ 100% = $258

Loan B = $4300 + $258 = $4558

Loan B has the lowest total payback.

Answer 2

The Loan B has the lowest total payback than the Loan A.

How to calculate the Payback?

WE can calculate the payback in both loan as;

Loan A;

Principal = $4500

Interest rate = 5%

Time in years = 3

If 100% => $4500

X = 5% × $4500 ÷ 100%

X = $225

Loan A = $4500 + $225 = $4725

Loan B;

Principal = $4300

Interest = 6%

Time in years = 3

If 100% => $4300

X = 6% × $4300 ÷ 100%

X= $258

Loan B = $4300 + $258 = $4558

Hence, the Loan B has the lowest total payback than the Loan A.

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