Compare the monthly payments and total loan costs for the following pairs of loan options. Assume that both loans are fixed rate and have the same closing costs.

You need a $80,000 loan.

Option1: a30-year loan at an APR of 6.65%.

Option2: a15-year loan at an APR of 6.25%.

Find the monthly payment for each option.

The monthly payment for option 1 is $_______

The monthly payment for option 2 is $________

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

Find the total amount paid for each option.

The total payment for option 1 is ___________

The total payment for option 2 is $__________

(Use the answers from the previous step. Round to the nearest cent asneeded.)

Compare the two options to determine which is the better economic option. Which appears to be the betteroption?

A.

Option 2 will always be the better option.

B.

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

C.

Option 1 is the betteroption, but only if the borrower needs the lower monthly payment.

D.

Option 1 will always be the better option.