Consider the two payment plans as shown here for an $18,000 auto loan.
Plan 1: Monthly payment of $306.91 over a period of 5 years, which corresponds to a compound interest rate of 0.9% compounded monthly.
Plan 2: Monthly payment of $229.02 over a period of 5 years, which corresponds to a compound interest rate of 1.9% compounded monthly.
Determine which plan has a lower cost of credit. Find the lower credit cost.
(1 point)
Responses
Plan 2 has a lower cost of credit, which is $823.08.
Plan 2 has a lower cost of credit, which is $823.08.
Plan 1 has a lower cost of credit, which is $1,534.55.
Plan 1 has a lower cost of credit, which is $1,534.55.
Plan 1 has a lower cost of credit, which is $414.60.
Plan 1 has a lower cost of credit, which is $414.60.
Plan 2 has a lower cost of credit, which is $414.60.
The correct answer is:
Plan 1 has a lower cost of credit, which is $1,534.55.