Math

Serena wanst to borrow $15 000 an pay it back in 10 years. Interest rates are so high, so the bank makes her 2 offers

option 1 - borrow the money at 12%/a compounded quarterly for the full term

option 2 -Borrow the money at 12%/a compunded quarterly for 5 years and then renegotiate the loan based on the mew balance for he last 5 years

if in 5 years the interest rate wil be 6%/a compunded quarterly , how much will Serena save by choosing the second option

  1. 👍
  2. 👎
  3. 👁
  1. option 1
    amount after 10 years = 15000(1.03)^40 = 48930.57

    option 2
    amount after 5 years at first rate = 15000(1.03)^20 = 27091.67
    amount of that 5 years later at new rate
    = 27091.67(1.015)^20 = 36488.55

    take the difference

    1. 👍
    2. 👎

Respond to this Question

First Name

Your Response

Similar Questions

  1. Math.

    For question 1-4 for the interest. All rates are annual interest rates. 1) principal, $400 rate, 5% time, 1 year. a. $10 b. $20 c. $40 d. $200 2) principal, $1,000 rate, 8.5% time, 3 years a. $255 b. $170 c. $22.5 d. $17 3)

  2. math

    serena has $2,500 to invest in a CD(certificate of deposit) if serena invests the $2,500 in the CD that yields 4% interest, what will the CD be worth after 2 years

  3. finance

    You borrow $149,000 to buy a house. The mortgage rate is 7.5 percent and the loan period is 30 years. Payments are made monthly. If you pay for the house according to the loan agreement, how much total interest will you pay?

  4. math

    Malik borrowed $8,000 to buy a new boat. He will pay off the loan after 4 years by paying back the principal plus 6.5% simple interest. How much will Malik pay back altogether?

  1. math

    jessica borrow$9000 from the bank to purchase a used car.the bank has given her an interest rate of 7.5%annually for a period of 2 1/2 year what is the total amount she will have to pay back at the end of the loan A)$1687.50

  2. Algebra

    Suppose you borrow $500 and you plan to pay it back all at once in 5 years. You are charged 2% interest compounded monthly. What is the total amount you will need to pay when the loan is due? Round your answer to the nearest

  3. Math

    Serena wants to borrow $15 000 and pay it back in 10 years. Interest rates are high, so the bank makes her two offers: • Option 1: Borrow the money at 10%/a compounded quarterly for the full term. • Option 2: Borrow the money

  4. fianance

    3. You decide to borrow $200,000 to build a new house. The bank charges an interest rate of 6% compounded monthly. If you pay the loan back over 30 years, what will your monthly payment be [rounded to the nearest dollar]?

  1. math

    Bill takes a lot of $9,000 and an 8% simple interest rate for 6 years How much interest will Bill pay after 2 years? How much interest will he pay in total for the loan ? $720.00;3,600.00 $1,408.00;4,224.00* $36,000.00;12,000.00

  2. Math

    You borrow $2,000 for a period of 4 years. You are charged simple interest at a rate of 3%. How much will you repay at the end of 4 years? So, do I draw out the formula I = P x R x T. I = Interest - unknown P = Principal - 2,000 R

  3. Finance

    Sauerfood company has decided to buy a new computer system with an expected life of 3 yrs. the cost is 150,000.the comapny can borrow $150,000 for 3yrs at 10% annual interest or for one yr at 8% annual interest. How much wld sauer

  4. finance

    You have credit card debt of $25,000 that has an APR (monthly compounding) of 15%. Each month you pay minimum monthly payment only. You are required to pay only the outstanding interest. You have received an offer in the mail for

You can view more similar questions or ask a new question.