7.1.2 exam: semester 1 exam\nchico is considering taking out a 14 - year loan with monthly payments of $185…

7.1.2 exam: semester 1 exam\nchico is considering taking out a 14 - year loan with monthly payments of $185 at an apr of 2.7%, compounded monthly, and this equates to a loan of $25,857.12. assuming that chicos monthly payment and the length of the loan remain fixed, which of these is a correct statement?\na. if the interest rate were 2.5%, the amount of the loan that chico is considering would be less than $25,857.12.\nb. if the interest rate were 3.1%, the amount of the loan that chico is considering would be more than $25,857.12.\nc. if the interest rate were 3.3%, the amount of the loan that chico is considering would be less than $25,857.12.\nd. if the interest rate were 2.9%, the amount of the loan that chico is

7.1.2 exam: semester 1 exam\nchico is considering taking out a 14 - year loan with monthly payments of $185 at an apr of 2.7%, compounded monthly, and this equates to a loan of $25,857.12. assuming that chicos monthly payment and the length of the loan remain fixed, which of these is a correct statement?\na. if the interest rate were 2.5%, the amount of the loan that chico is considering would be less than $25,857.12.\nb. if the interest rate were 3.1%, the amount of the loan that chico is considering would be more than $25,857.12.\nc. if the interest rate were 3.3%, the amount of the loan that chico is considering would be less than $25,857.12.\nd. if the interest rate were 2.9%, the amount of the loan that chico is

Answer

Explanation:

Step1: Understand loan - interest relationship

The loan amount is inversely related to the interest rate when the monthly payment and loan - term are fixed. A lower interest rate means a higher loan amount can be paid off with the same monthly payment over the same period, and a higher interest rate means a lower loan amount can be paid off with the same monthly payment over the same period.

Step2: Analyze each option

  • Option A: A lower interest rate (2.5% < 2.7%) should result in a higher loan amount, not a lower one. So, option A is incorrect.
  • Option B: A higher interest rate (3.1%>2.7%) should result in a lower loan amount, not a higher one. So, option B is incorrect.
  • Option C: A higher interest rate (3.3% > 2.7%) means that with the same monthly payment and loan - term, the loan amount will be less than the original loan amount of $25,857.12. This option is correct.
  • Option D: A higher interest rate (2.9%>2.7%) should result in a lower loan amount, not a higher one. So, option D is incorrect.

Answer:

C. If the interest rate were 3.3%, the amount of the loan that Chico is considering would be less than $25,857.12.