Compare the monthly payment and total payment for the following pairs of loan options. Assume that both loans are fixed rate and have the same closing costs. You need a $180,000 loan. Option 1: a 30-year loan at an APR of 7.5%. Option 2: a 15-year loan at an APR of 6.5%. Question content area bottom Part 1 Find the monthly payment for each option. The monthly payment for option 1 is $enter your response here. The monthly payment for option 2 is $enter your response here. (Do not round until the final answer. Then round to the nearest cent as needed.) Part 2 Find the total payment for each option. The total payment for option 1 is $enter your response here. The total payment for option 2 is $enter your response here. (Round to the nearest cent as needed.) Part 3 Compare the two options. Which appears to be the better option? A. Option 1 will always be the better option. B. Option 1 is the better option, but only if the borrower plans to stay in the same home for the entire term of the loan. C. Option 2 is the better option, but only if the borrower can afford the higher monthly payments over the entire term of the loan. D. Option 2 will always be the better option.

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 7FPE: Calculating interest and APR of installment loan. Assuming that interest is the only finance charge,...

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Question content area bottom

Part 1

Find the monthly payment for each option.

The monthly payment for option 1 is

$enter your response here.

The monthly payment for option 2 is

$enter your response here.

(Do not round until the final answer. Then round to the nearest cent as needed.)

Part 2

Find the total payment for each option.

The total payment for option 1 is

$enter your response here.

The total payment for option 2 is

$enter your response here.

(Round to the nearest cent as needed.)

Part 3

Compare the two options. Which appears to be the better option?

Option 1 will always be the better option.

Option 1 is the better option, but only if the borrower plans to stay in the same home for the entire term of the loan.

Option 2 is the better option, but only if the borrower can afford the higher monthly payments over the entire term of the loan.

Option 2 will always be the better option.

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