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 $(0)$ with a minus sign $(-).)$

Buy On Time or Pay Cash

Cost of Borrowing

$1.$

Terms of the loan

a$.$ Amount of the loan

b$.$ Length of the loan $($in years$)$

c$.$ Monthly payment

$2.$ Total loan payments made

$($$ per month

$3.$ Less: Principal amount of the loan

$4.$ Total interest paid over life of loan

$5.$ 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

$x\%)$

Total after$-$tax interest cost on the loan

Cost of Paying Cash

$9.$ Annual interest earned on savings

$10.$ Annual after$-$tax interest earnings $($$$,x,\%)$

$$13,000\mathrm{.}00$

$4$

$$299\mathrm{.}39$

$2.$ Total loan payments made

$3.$ $ per month

$4.$ $ Total interest paid over life $of$ loan

$6.7.8.$ Cost of Paying Cash

$9.$ Total after$-$tax interest earnings over life of loan

$11.$ years$)$

Net Cost of Borrowing

$12.$ Difference in cost of borrowing versus cost of paying cash