you and mr. jones both got a $15,000 auto loan. however, you have a higher interest rate on your loan than…
you and mr. jones both got a $15,000 auto loan. however, you have a higher interest rate on your loan than mr. jones. which of the following will also be higher for you as a result? check all that apply. your total interest your total cost of the loan your monthly payment
Answer
Explanation:
Step1: Analyze Total Interest
Total interest on a loan depends on the interest rate (along with principal and time). A higher interest rate, with the same principal ($15,000) and assuming the same loan term, will lead to higher total interest. So "Your total interest" will be higher.
Step2: Analyze Total Cost of Loan
Total cost of the loan is principal + total interest. Since total interest is higher (from Step1) and principal is the same, total cost (principal + higher interest) will be higher. So "Your total cost of the loan" will be higher.
Step3: Analyze Monthly Payment
The monthly payment formula for a loan is ( M = P \frac{r(1 + r)^n}{(1 + r)^n - 1} ), where ( M ) is monthly payment, ( P ) is principal, ( r ) is monthly interest rate (derived from annual rate), and ( n ) is total number of payments. With a higher annual interest rate (so higher ( r )), and same ( P ) and ( n ), the monthly payment ( M ) will be higher. So "Your monthly payment" will be higher.
Answer:
- Your total interest
- Your total cost of the loan
- Your monthly payment