You Are Considering Two Payment Options on a $700,000 25-Year

question 378

Multiple Choice

You are considering two payment options on a $700,000 25-year mortgage having an interest rate of 4% compounded monthly. The first option is to make monthly payments at the start of each month, while the second option is to make payments at the end of each month. How much interest will be saved by choosing the first option?

• A) $3,683
• B) $3,999
• C) $2,946
• D) $3,695
• E) $3,734

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Definitions:

Fixed Costs

Expenses that do not change as a function of the activity of a business, within the relevant period.

Break-Even Point

The level of sales at which total revenues equal total costs, resulting in no net loss or gain.

Sales Mix

The composition of a company’s product or service sales, showing the relative proportions of each product or service sold.

Net Income

The total revenue minus total expenses, indicating the profitability of a company over a specific period.