Answer:
Difference in total payback = $5734.64
Step-by-step explanation:
Formula for the simple interest payout,
Interest = [tex]\frac{P\times r\times t}{100}[/tex]
P = Principal amount of loan
r = rate of interest (Annually)
t = Duration for the payment
Interest = [tex]\frac{18000\times 14.5\times 5}{100}[/tex]
= $13050
Total payable amount = 18000 + 13050
= $31050
Formula for the amount payable with compound interest,
Final amount = [tex]\text{Initial amount}(1+\frac{r}{n})^t[/tex]
Here, t = Duration of investment
r = rate of interest (Annual)
n = Number of compounding per year
Payable amount = [tex]18000(1+\frac{0.089}{1})^4[/tex]
= 18000(1.089)⁴
= $25315.36
Difference in total payback = $31050 - $25315.36
= $5734.64
If Lucas takes the 5-year payment plan he will end up paying $31,050. If Lucas takes the 4-year payment plan he will end up playing $24,408. Hope it helps.
