Emily decides to buy a new boat at a cost of $20 000, but cannot afford the full amount. The boat dealership offers two options to finance a loan.
First option:
A 5 year loan at a nominal annual interest rate of 15%, compounded monthly.
No deposit required and repayments are made each month.
Find the repayment made each month.
A 5 year loan at a nominal annual interest rate of % compounded quarterly. Terms of the loan require a 5% deposit and a monthly repayment of $400.
Find the annual interest rate, .
State which option Emily should choose. Justify your answer.
Did this page help you?