Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You need to borrow $2000 for college expenses. You would like to repay it after 2 years when you expect to be fully employed. You

  1. You need to borrow $2000 for college expenses. You would like to repay it after 2 years when you expect to be fully employed. You have two options:
    1. You can borrow it from your credit union at an interest rate of 10%. You will pay it back at the end of 2 years -the $2000 plus the finance charge.
    2. Your uncle says he will lend you the money for 9% if you pay the finance charge in advance. At the end of the two years you will pay him back the $2000.
    3. Which loan would you choose?

For each option, compute the finance charges and the APR.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

To determine which loan option is better we need to calculate the finance charges and the annual per... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

7th Canadian Edition Volume 2

1119048478, 978-1119048473

More Books

Students also viewed these Finance questions