math 106

A lender offers a choice between two loans. For loan A the lender charges 12% a year compounded 12 times a year. For loan B the lender charges 12.5% a year and compounds it once a year. Is loan A or loan B a cheaper loan for the borrower. Please show work!!!

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  1. Loan A:
    P = Po(1+r)^n.

    Po = $100.

    r = 0.12/12mo. = 0.01/mo.

    P = 100(1.01)^12 = $$112.68

    Loan B:
    P = 100(1.125)^1 = $112.50

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    posted by Henry
  2. The amount of loan can be any value as long as the loans are equal.

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    posted by Henry

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