Ask a New Question
Menu

Select the correct answer.

Jasmine has excellent credit, and she is looking to purchase a new car that costs $25,000. She has multiple interest rate offers on a car loan. Which offer would save Jasmine the most amount of money?

A.
Bank C is offering a 2.7% interest rate for this loan.
B.
Bank A is offering a 2% interest rate for this loan.
C.
Bank B is offering a 2.5% interest rate for this loan.
D.
Dealer is offering a 0% interest rate for a new car, plus $1,000 off the price.

1 answer

To determine which offer would save Jasmine the most money, let's calculate the total cost for each option.

  1. Bank A (2% interest rate):

    • Loan amount: $25,000
    • Interest Rate: 2%
    • Total Cost = Principal + Interest
    • Assuming a 5-year loan term (this term is common but needs to be specified; if it’s different, the calculation will change):
    • Interest = Principal × Rate × Time = $25,000 × 0.02 × 5 = $2,500
    • Total Cost = $25,000 + $2,500 = $27,500

  2. Bank B (2.5% interest rate):

    • Interest = $25,000 × 0.025 × 5 = $3,125
    • Total Cost = $25,000 + $3,125 = $28,125

  3. Bank C (2.7% interest rate):

    • Interest = $25,000 × 0.027 × 5 = $3,375
    • Total Cost = $25,000 + $3,375 = $28,375

  4. Dealer (0% interest rate with $1,000 off):

    • Discounted Price = $25,000 - $1,000 = $24,000
    • Total Cost = $24,000 (since there is no interest)

Now comparing the total costs:

  • Bank A: $27,500
  • Bank B: $28,125
  • Bank C: $28,375
  • Dealer: $24,000

The lowest total cost is from the Dealer with a total of $24,000.

Therefore, the correct answer is: D. Dealer is offering a 0% interest rate for a new car, plus $1,000 off the price.