question 6 of 8\naisha needs a loan to finance her latest startup. she wants a loan with the lowest overall…

question 6 of 8\naisha needs a loan to finance her latest startup. she wants a loan with the lowest overall interest costs. she’s considering a 3 - year loan with an 8% fixed interest rate or a 5 - year loan with a 6% fixed interest rate. why would aisha pick the 3 - year loan?\nselect a response.\nit has a lower total cost.\nit has a smaller monthly payment.\nit has a lower interest rate.\nit has a higher loan amount.

question 6 of 8\naisha needs a loan to finance her latest startup. she wants a loan with the lowest overall interest costs. she’s considering a 3 - year loan with an 8% fixed interest rate or a 5 - year loan with a 6% fixed interest rate. why would aisha pick the 3 - year loan?\nselect a response.\nit has a lower total cost.\nit has a smaller monthly payment.\nit has a lower interest rate.\nit has a higher loan amount.

Answer

Answer:

It has a lower total cost.

Explanation:

Step1: Calculate interest for 3 - year loan

Let the loan amount be $P$. Interest for 3 - year loan at 8% is $I_1 = P\times0.08\times3=0.24P$.

Step2: Calculate interest for 5 - year loan

Interest for 5 - year loan at 6% is $I_2 = P\times0.06\times5 = 0.3P$.

Step3: Compare interests

Since $0.24P<0.3P$, 3 - year loan has lower total interest cost, so lower total cost.