Kay has decided to take out a $23,100 loan, and she wants to pay it back in quarterly installments. She has narrowed her options down to two banks. Bank V offers a six-year loan with an interest rate of 4.6%, compounded quarterly, and has a service charge of $822.45. Bank W offers an eight-year loan with an interest rate of 3.9%, compounded quarterly, and a service charge of $722.25. Which loan will have the greater total finance charge, and how much greater will it be? Round all dollar values to the nearest cent.

Question

Business

Daniel Padilla

15 December, 18:17

Kay has decided to take out a $23,100 loan, and she wants to pay it back in quarterly installments. She has narrowed her options down to two banks. Bank V offers a six-year loan with an interest rate of 4.6%, compounded quarterly, and has a service charge of $822.45. Bank W offers an eight-year loan with an interest rate of 3.9%, compounded quarterly, and a service charge of $722.25. Which loan will have the greater total finance charge, and how much greater will it be? Round all dollar values to the nearest cent.

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Answers (2)

Know the Answer?

Petty · Answer 1

Petty 15 December, 18:57

0

correct answer is A on edge

2020

Theodore Weeks · Answer 2

The loan offered by bank W charges the most, $722.25 + $3,902.20 = $4,632.45.

The loan offered by bank V charges, $822.45 + $3,466 = $4,288.45

Loan W has $336 more in financial charges.

Explanation:

If Kay decides to take the loan form bank V, he will have to pay the initial service charge of $822.45, plus 24 quarterly installments of $1,106.92 each. The total interest charged by the bank will be $3,466

If he decides to take the loan form bank W, he will have to pay the initial service charge of $722.25, plus 36 quarterly installments of $843.82 each. The total interest charged by the bank will be $3,901.20.