The correct option for the total lifetime cost for Toby to pay off his four loans is $31,616.
Computation of present value of the loans:
The given information is:
Principal = $ 6125
Interest rate = 5.3%
[tex]\text{The effective monthly interest rate} (i) =\frac{0.053}{12} \\ \text{The effective monthly interest rate} (i) = 0.0044[/tex]
[tex]\text{The effective annual interest rate} (i) = (1 + 0.0044)^{12} -1\\ \text{The effective annual interest rate} (i) = 0.0543[/tex]
The present worth of all the loans is:
[tex]P = 6125 + 6125 \times (1 + 0.0543)^{1} + 6125\times (1 + 0.0543)^{2} + 6125 \times(1 + 0.0543)^{3} \\P = $22,671.40[/tex]
If he starts paying after four years, the worth of the loans by then is:
[tex]\text{Total lifetime cost} = P \times \text{Effective Annual Interest Rate}\\\text{Total lifetime cost}= 22671.40\times (1 + 0.0543)^{4} = 31,616.16[/tex]
Therefore, the correct option is b.
To know more about the effective interest rates and loans worth, refer to the link below:
https://brainly.com/question/1757741
