I need help with understanding the calculatin breakdown for the problem below -  Pete needs $8000 in student loans to finish out the year. He is comparing two different loans. The current interest rate is 6%  for a 5 year loan 4% for a 10 year loan. Loan A (5 years) results in monthly payments of $154.66 and a total payback value of $9,279.60. Loan B (10 years) results in monthly payments of $81.00 and a total payback value of $9,720. Which loan requires more interest to be paid and by how much?

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 25PROB
icon
Related questions
Question

I need help with understanding the calculatin breakdown for the problem below - 

Pete needs $8000 in student loans to finish out the year. He is comparing two different loans. The current interest rate is 6%  for a 5 year loan 4% for a 10 year loan.

Loan A (5 years) results in monthly payments of $154.66 and a total payback value of $9,279.60.

Loan B (10 years) results in monthly payments of $81.00 and a total payback value of $9,720.

Which loan requires more interest to be paid and by how much?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Long Term Career Development
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Recommended textbooks for you
EBK CFIN
EBK CFIN
Finance
ISBN:
9781337671743
Author:
BESLEY
Publisher:
CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Financial Accounting: The Impact on Decision Make…
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning