A new homeowner is purchasing a living room set for $2,590 and must decide between two monthly installment financing offers.

Offer 1: $200 down payment, remaining balanced financed at a 24.90% interest rate for 3 years.

Offer 2: $425 down payment, remaining balanced financed at a 22.90% interest rate for 4 years.

Part A: What is the total cost of offer 1? Explain which technology you used to solve and each step of your process. (3 points)

Part B: What is the total cost of offer 2? Explain which technology you used to solve and each step of your process. (3 points)

Part C: Which financing offer should the new homeowner choose? Explain your reasoning. (4 points)







Question 12


A $225,000 adjustable-rate mortgage is expected to have the following payments:


Year Interest Rate Monthly Payment
1–5 4% $1,074.18
6–15 6% $1,311.20
16–25 8% $1,484.91
26–30 10% $1,555.99


A fixed-rate mortgage in the same amount is offered for 30 years and 7% interest.

Part A: What is the total cost of the adjustable-rate mortgage? State which technology or method you used. Show or explain all steps. (3 points)

Part B: What is the total cost of the fixed-rate mortgage? State which technology or method you used. Show or explain all steps. (3 points)

Part C: Using your values from parts A and B compare the advantages and disadvantages of the two loan types. (4 points)