Jacob needs to borrow $19 000 to purchase a car.If the interest rate is seven percent compounded monthly,which of the following is true when considering a five,seven or ten year term?
A)If he selects a seven year term he will save interest by keeping his payments to $286.76 per month.
B)If he selects a ten year term he will save $2385.28 in interest compared with the seven year term.
C)If he selects a five year term he will save $1514.55 in interest compared with the seven year term.
D)The overall interest will be the same,regardless of the term.

Question

Quizplus · Accepted Answer

Interest savings are greater when the loan term is shorter because less time accrues for interest to compound. Therefore, a five-year term would save more in interest compared to a seven-year term, making option C correct. Options A, B, and D are incorrect because longer terms result in more interest paid, not less.

Jacob Needs to Borrow $19 000 to Purchase a Car