Anakin is considering two loans, which have the following terms:
Loan A has an interest rate of 6.85%, compounded quarterly.
Loan B has an interest rate of 6.92%, compounded annually.
Which loan should Anakin choose, and why?
Loan A, because it yeilds more interest.
Loan A, because it yeilds less interest.
Loan B, because it yeilds more interest.
Loan B, because it yeilds less interest.
There is not enough information to say.
1 answer
Loan A should be chosen because it has a lower interest rate (6.85% compared to 6.92% for Loan B) and it compounds more frequently (quarterly compared to annually for Loan B). This means that Anakin will pay less in interest over the life of the loan with Loan A.