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Use the information provided to complete the following worksheet and analyze how the numbers work out most favorably for you. For simplicity, compounding is ignored
Use the information provided to complete the following worksheet and analyze how the numbers work out most favorably for you. For simplicity, compounding is ignored in calculating both the cost of interest and interest earnings. Note: Enter your dollar answers rounded to the nearest two cents and precede numbers that are less than zero with a minus sign
Buy On Time or Pay Cash
Cost of Borrowing
Terms of the loan
a Amount of the loan
b Length of the loan in years
c Monthly payment
Total loan payments made
$ per month
Less: Principal amount of the loan
Total interest paid over life of loan
Tax considerations:
Is this a home equity loan?
no
Do you itemize deductions on your federal tax return? yes
What federal tax bracket are you in
Taxes saved due to interest deductions
Total aftertax interest cost on the loan
Cost of Paying Cash
Annual interest earned on savings
Annual aftertax interest earnings $
$
$
Total loan payments made
$ per month
$ Total interest paid over life loan
Cost of Paying Cash
Total aftertax interest earnings over life of loan
years
Net Cost of Borrowing
Difference in cost of borrowing versus cost of paying cash
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