Consider the following two loans for  
P
0
=
$
5
,
000
 .

Loan A:  
5
  year loan, annual interest rate of  
7
%
 , monthly repayments of  
$
99.01
 .
Loan B:  
4
  year loan, annual interest rate of  
8
%
 , monthly repayments of  
$
122.06
 .
On which loan will you pay the least interest?

Select the correct answer below:


Loan B

Loan A

To determine which loan results in paying the least interest, we need to calculate the total interest paid for each loan. The total interest paid is given by the formula:

\[
\text{Total Interest} = (\text{Monthly Payment} \times \text{Number of Payments}) - P_0
\]

where $ P_0 $ is the initial loan amount.

### Loan A:
- $ P_0 = 5000 $
- Monthly payment = $ 99.01 $
- Duration = 5 years = 60 months

\[
\text{Total Payments for Loan A} = 99.01 \times 60 = 5940.6
\]
\[
\text{Total Interest for Loan A} = 5940.6 - 5000 = 940.6
\]

### Loan B:
- $ P_0 = 5000 $
- Monthly payment = $ 122.06 $
- Duration = 4 years = 48 months

\[
\text{Total Payments for Loan B} = 122.06 \times 48 = 5858.88
\]
\[
\text{Total Interest for Loan B} = 5858.88 - 5000 = 858.88
\]

### Conclusion:
- Total interest for Loan A: $ 940.6 $
- Total interest for Loan B: $ 858.88 $

Since Loan B has the lower total interest, **Loan B** is the correct answer.

Would you like more details or have any questions?

### Follow-up Questions:
1. How does the loan term impact the total interest paid?
2. Can interest rates affect short-term versus long-term loans differently?
3. How do different loan amortization schedules impact total interest?
4. What other factors should you consider when choosing between loans?
5. What happens if you make additional payments on either loan?

**Tip:** Paying more than the minimum monthly payment can reduce the total interest paid over the life of the loan.

Consider the following two loans for P0 = $5,000. Loan A: 5 year loan, annual interest rate of 7%, monthly repayments of $99.01. Loan B: 4 year loan, annual interest rate of 8%, monthly repayments of $122.06. On which loan will you pay the least interest? Select the correct answer below: Loan B, Loan A.

Compare two loans with different terms and interest rates to determine which has the lower total interest paid. Learn how to calculate total interest using financial mathematics, focusing on key formulas for loan comparison. Suitable for high school students, Grades 9-12.

Math Problem Statement

Consider the following two loans for
P 0

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