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? Loan A will have the lowest total payback because the amount of interest paid is less than the amount of interest paid for loan B. Loan A will have the lowest total payback because the total of the principal and the interest paid for loan A is less than the same total for loan B. Loan B will have the lowest total payback because the interest is less than the interest for loan A. Loan B will have the lowest total payback because the total of the principal and the interest paid for loan B is less than the same total for loan A.
Answers
Answer:
Loan A will have the lowest total payback because the amount of interest paid is less than the amount of interest paid for loan
Given: Lamar is considering two loans. Loan A Loan B Principal $4,500 $4,300 Interest rate 5% 6% Time in years 3 3.
To find: Which loan will have the lowest total payback.
Solution:
The principal amount of loan A is greater than that of the principal amount of loan B. The interest rate of loan B is greater than that of the interest rate of loan A. The time taken in years is the same for both the loans. The simple interest can be calculated using the following formula.
The interest earned from loan A is Rs. 675 and the interest earned from loan B is Rs. 774. Now, the amounts from loans A and B are Rs. 5175 and Rs. 5074, respectively.
Therefore, Loan B will have the lowest total payback because the total of the principal and the interest paid for loan B is less than the same total for loan A.