Use PMT = P(r/n) / [1-(1/r+n)⁻ⁿᵗ Round to the nearest dollar.
Suppose that you borrow $18,000 for a new car. You can select one of the following loans, each requiring regular monthly payments: Installment Loan A: three-year loan at 5.3% Installment Loan B: five-year loan at 6.3%. Find the monthly payments and the total interest for both Loan A and Loan B. Compare the monthly payments and the total interest for the two loans.
A) Loan A: $351, $3060; Loan B: $542, $1512; The monthly payment is lower with the shorter-term loan but the total interest is less with the longer-term loan.
B) Loan A: $542, $1512; Loan B: $351, $3060; The monthly payment is lower with the longer-term loan but the total interest is less with the shorter-term loan.
C) Loan A: $1008, $18,288; Loan B: $991, $41,460; The monthly payment is lower with the longer-term loan but the total interest is less with the shorter- term loan.
D) Loan A: $991, $41,460; Loan B: $1008, $18,288; The monthly payment is lower with the shorter-term loan but the total interest is less with the longer- term loan.
