Mr. Ye is considering two different loan options for $12,000 to fund a home
improvement project. Option 1 is to borrow
this money for 4 years at 4.25% annual
simple interest. Option 2 is to borrow the
money for 5 years at 3.4% annual simple
interest. If no payments are made until the
end of the loan period, which statement is
true regarding this situation?
A The loan amount plus interest owed at
the end of the loan period is greater for
Option 1 than for Option 2.
B The loan amount plus interest owed at
the end of the loan period for Option 1
is equal to that of Option 2.
C The loan amount plus interest owed at
the end of the loan period is less for
Option 1 than for Option 2.
D The length of time money is borrowed
has no affect on the total cost of a loan
since it is the interest rate alone that
determines the total loan cost.