Compare the monthly payment and total payment for the following pairs of loan options. Assume that both loans are fixed rate and have the same closing costs. (Round all answers to the nearest cent as needed.)
You need a $120,000 loan.
Option 1: a 30-year loan at an APR of 8%.
Option 2: a 15-year loan at an APR of 7%.
a) What is the monthly payment for option 1?
b) What is the monthly payment for option 2?
c) What is the total amount paid for option 1?
d) What is the total amount paid for option 2?
e) If the borrower can afford the higher monthly payments over the entire term of the loan, which appears to be the better option?
1 answer