Which results in a lower total interest charge, borrowing $900900 to be repaid 12 months later as a single-payment loan or borrowing $900900 to be repaid as a 12-month installment loan? Assume a simple interest method of calculation at 12.7512.75 percent interest. Defend your answer. Note: Round intermediate computations to at least five (5) decimal places. Click on the table icon to view the Monthly Installment Loan Payment Factor (MILPF) table: LOADING... . Question content area bottom Part 1 The amount of interest on the single-payment loan is $114.75114.75. (Round to the nearest cent.) Part 2 The amount of interest on the 12-month installment loan is $63.3663.36. (Round to the nearest cent.) Part 3 Why does the 12-month installment loan result in lower interest charges? (Select the best choice below.) A. Interest costs are higher when you have the use of the entire $900900 for the full year (the single-payment loan). With installment payments, the principal is gradually being repaid and interest is paid only on the unpaid balance of the loan. B. Interest costs are lower when you have the use of the entire $900900 for the full year (the single-payment loan). With installment payments, the principal is gradually being repaid and interest is paid only on the unpaid balance of the loan.
Which results in a lower total interest charge, borrowing $900900 to be repaid 12 months later as a single-payment loan or borrowing $900900 to be repaid as a 12-month installment loan? Assume a simple interest method of calculation at 12.7512.75 percent interest. Defend your answer. Note: Round intermediate computations to at least five (5) decimal places. Click on the table icon to view the Monthly Installment Loan Payment Factor (MILPF) table: LOADING... . Question content area bottom Part 1 The amount of interest on the single-payment loan is $114.75114.75. (Round to the nearest cent.) Part 2 The amount of interest on the 12-month installment loan is $63.3663.36. (Round to the nearest cent.) Part 3 Why does the 12-month installment loan result in lower interest charges? (Select the best choice below.) A. Interest costs are higher when you have the use of the entire $900900 for the full year (the single-payment loan). With installment payments, the principal is gradually being repaid and interest is paid only on the unpaid balance of the loan. B. Interest costs are lower when you have the use of the entire $900900 for the full year (the single-payment loan). With installment payments, the principal is gradually being repaid and interest is paid only on the unpaid balance of the loan.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Which results in a lower total interest charge, borrowing
$900900
to be repaid 12 months later as a single-payment loan or borrowing
$900900
to be repaid as a 12-month installment loan? Assume a simple interest method of calculation at
12.7512.75
percent interest. Defend your answer. Note: Round intermediate computations to at least five (5) decimal places.
Click on the table icon to view the Monthly Installment Loan Payment Factor (MILPF) table:
LOADING...
.Question content area bottom
Part 1
The amount of interest on the single-payment loan is
$114.75114.75.
(Round to the nearest cent.)Part 2
The amount of interest on the 12-month installment loan is
$63.3663.36.
(Round to the nearest cent.)Part 3
Why does the 12-month installment loan result in lower interest charges? (Select the best choice below.)
Interest costs are higher when you have the use of the entire
$900900
for the full year (the single-payment loan). With installment payments, the principal is gradually being repaid and interest is paid only on the unpaid balance of the loan.Interest costs are lower when you have the use of the entire
$900900
for the full year (the single-payment loan). With installment payments, the principal is gradually being repaid and interest is paid only on the unpaid balance of the loan.AI-Generated Solution
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