Large Home Improvement Store: Total remodeling cost $13,200. Financing through the bank servicing the national home improvement company: 1 year 0% financing with a minimum monthly payment of $100; 16.99% APR for the remaining 3 years
Local Small Business Home Improvement Company: Total remodeling cost 11,800. Financing through her local credit union: 3% origination fee to be paid first then 7.5% APR for 5 years
Online Construction Business: Total remodeling costs $10,200. Financing through an online banking service: $1,000 applied toward the project before payback begins then 11.9% APR for 4 years.
Calculate the monthly payments for 2 of these options given that interest is compounded monthly.
What is the total amount that must be paid for each of the 2 options you chose?
In the 2 options you chose, what percentage of the total amounts to be paid back to each financial institution is interest?
How would you explain to Ramona the differences between these percentages and their corresponding APR’s?
Based on the financial outcomes for the 2 options you chose, which company would you suggest that Ramona choose to remodel her kitchen? Defend your suggestion.
