Answer:
(a) $1549.89
(b) $1238.12
(c) The bank total payoff is less expensive by $215.05
Step-by-step explanation:
An appropriate formula for finding the monthly payment A on a loan of principal value P at annual interest rate r for t years is ...
A = P(r/12)/(1 -(1+r/12)^(-12t))
(a) For P=91,000, r = 13.4%, t = 8 years, the monthly payment is ...
A = $91,000(.134/12)/(1 -(1+.134/12)^(-96)) ≈ $1549.89
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(b) For the same P and r = 10.7%, t = 10, the monthly payment is ...
A = $91,000(.107/12)/(1 -(1+.107/12)^-120) ≈ $1238.12
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(c) The total repayment cost of the first loan is ...
$1549.89 × 96 = $148,789.66 . . . . using unrounded values
The total repayment cost of the second loan is ...
$1238.12 × 120 = $148,574.61 . . . . using unrounded values
Then the difference is ...
$148,789.66 -148,574.61 = $215.05 . . . . in favor of the bank loan
The total amount paid to the bank would be $215.05 less than to the on-line lending company.
