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Jim and Patty Smith want to get an installment loan of $7,999 to replace their dining room furniture.  They can get the loan at an APR of 9% for 24 months or at an APR of 10% for 30 months.  Which loan costs less?  How much do the Smiths save by taking the loan that costs less?  Do not round until the final answer.

Lowest cost loan: Savings:​

Verified Answer :

Answer:

48,004

Step-by-step explanation:

The Smiths save money by taking the 24-month loan at 9% APR.

Here's the breakdown without rounding:

Loan 1: 24 months at 9% APR

We don't need to calculate the monthly payment here as we only need to compare costs.

Total Cost (Loan 1) = Loan Amount (Months)

= $7,999 (24 months)

= $191,976

Loan 2: 30 months at 10% APR

We don't need to calculate the monthly payment here as well.

Total Cost (Loan 2) = $7,999 (30 months)

= $239,970

Cost Comparison and Savings

Total Cost (Loan 2) - Total Cost (Loan 1) = Savings

= $239,970 - $191,976

= $48,004

Therefore, the Smiths save $48,004 by choosing the 24-month loan at 9% APR.

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