Question

how does making a higher down payment on a loan impact the cost of borrowing?○ it reduces the total cost of borrowing because you will have a higher principal balance.○ it increases the total cost of borrowing because you will have a lower principal balance.○ it increases the total cost of borrowing because you will pay more in interest.○ it reduces the total cost of borrowing because you will pay less in interest.

Explanation:

A higher down payment lowers the principal amount you need to borrow. Since interest is calculated based on the principal balance, a smaller principal means you will accrue and pay less total interest over the loan term, which reduces the overall cost of borrowing. The incorrect options either misstate the effect on principal/interest or the overall cost impact.

Answer:

It reduces the total cost of borrowing because you will pay less in interest.