You and your friend are comparing two loan options for a $165,000 house. loan 1 is a 15-year loan with an annual interest rate of 3%. loan 2 is a 30-year loan with an annual interest rate of 4%. your friend claims the total amount repaid over the loan will be less for loan 2. is your friend correct? justify your answer.

No, he is wrong.

Step-by-step explanation:

Since, the total payment of a loan after t years,

Where,

P = present value of the loan,

r = rate per period ,

n = number of periods,

Given,

P = $165,000,

In loan 1 :

r = 3% = 0.03, t = 15 years,

So, the total payment of the loan is,

In loan 2 :

r = 4% = 0.04, t = 30 years,

So, the total payment of the loan is,

Since,

Hence, total amount repaid over the loan will be less for Loan 1.

That is, the friend is wrong.

1. 22

2. 1

3. 7

4. 18

step-by-step explanation

e2020 got it right

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