Jacob Needs to Borrow $19 000 to Purchase a Car

question 20

Multiple Choice

Jacob needs to borrow $19 000 to purchase a car.If the interest rate is seven percent compounded monthly,which of the following is True when considering a five,seven or ten year term?

• A)If he selects a seven year term he will save interest by keeping his payments to $286.76 per month.
• B)If he selects a ten year term he will save $2385.28 in interest compared with the seven year term.
• C)If he selects a five year term he will save $1514.55 in interest compared with the seven year term.
• D)The overall interest will be the same,regardless of the term.

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Definitions:

Equity Accounted Balance

A valuation method used in accounting for investments, where the investment is initially recognized at cost and subsequently adjusted for the investor’s share of the investee’s net assets changes, including profits and losses.

Profit/(Loss)

The financial result of a business's operations for a specific period, calculated as income minus expenses. If positive, it's a profit; if negative, a loss.

Equity Accounted Balance

A valuation method for the recognition of investments in associates, where the investment is initially recorded at cost and adjusted for the investor’s share of the net profit or loss of the investee.

Profit/(Loss)

The financial result of a company's operations and activities over a specific period, indicating net earnings or losses.