2) Jennifer is considering taking out a loan with a principal of
$16,200 from one of two banks. Bank F charges an interest
rate of 5.7%, compounded monthly, and requires that the
loan be paid off in eight years. Bank G charges an interest
rate of 6.2%, compounded monthly, and requires that the
loan be paid off in seven years. How would you
recommend that Jennifer choose her loan?

Step-by-step explanation:

We would apply the formula for determining compound interest which is expressed as

A = P(1+r/n)^nt

Where

A = total value of the loan at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount borrowed

Considering Bank F's offer,

From the information given,

P = $16200

r = 5.7% = 5.7/100 = 0.057

n = 12 because it was compounded 12 times in a year.

t = 8 years

Therefore,

A = 16200(1 + 0.057/12)^12 × 8

A = 16200(1.00475)^96

A = $25531.2

Considering Bank G's offer,

From the information given,

P = $16200

r = 6.2% = 6.2/100 = 0.062

n = 12 because it was compounded 12 times in a year.

t = 7 years

Therefore,

A = 16200(1 + 0.062/12)^12 × 7

A = 16200(1.00517)^84

A = $24980.4

Bank G's offer is better because she would pay a lower amount of interest in total

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