Personal Finance Semester Exam
25 of 4025 of 40 Items
Question
Use the comparison chart to answer the question.
Naomi is considering two loans, both for the same amount. She examined both Truth-in-Lending statements and made the following comparison chart:
Loan Option 1 Loan Option 2
APR(%) 6.35 6.50
number of payments 60 48
Amount ($) Amount ($)
down payment 0.00 1,000.00
amount financed 10,000.00 9,000.00
total payments 11,697.60 10,244.64
total finance charge 1,697.60 1,244.64
total sale price 11,697.60 11489.28
monthly payment 194.96 213.43
Naomi is expecting both a raise and a bonus within the next 6 months, so she would be comfortable with higher payments, but she does not have cash on hand for a down payment. Given these facts, which loan should Naomi select?
(1 point)
Responses
Loan 1: The monthly payment is less.
Loan 1: The monthly payment is less.
Loan 2: The total finance charge is less.
Loan 2: The total finance charge is less.
Loan 2: The down payment lowers the amount financed.
Loan 2: The down payment lowers the amount financed.
Loan 1: There is no down payment required.
Loan 1: The monthly payment is less.
Naomi is expecting a raise and bonus within the next 6 months, so she would be comfortable with higher payments. Loan 1 has a lower monthly payment, which would be more manageable for Naomi. Additionally, Loan 1 does not require a down payment, which is another advantage for her.