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 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 Total loan payments made $15,000 $470.10 2. per monthmonths) 3. Less: Principal amount of the loarn 4 Total interest paid over life of loarn 5. Tax considerations: - Is this a home equity loan? - Do you itemize deductions on your federal tax return? What federal tax bracket are you in? Taxes saved due to interest deductions no yes 10% 6. 7. 8. Total after-tax interest cost on the loan Cost of Paying Cash 9 Annual interest earned on savings (39ex 10 Annual after-tax interest earnings 11 Total after-tax interest earnings over life of loan years) Net Cost of Borrowing 12. Difference in cost of borrowing versus cost of paying cash