When comparing two installment loans with the same principal and annual percentage rate (APR), the loan with:
A) the longer maturity will have the lower monthly payment and the higher total costs.
B) the shorter maturity will have the lower monthly payment and the higher total costs.
C) the longer maturity will have the higher monthly payment and the higher total costs.
D) the shorter maturity will have the lower monthly payment and the lower total costs.
E) the longer maturity will have the higher monthly payment and the lower total costs.

Question

Quizplus · Accepted Answer

The longer the maturity of a loan, the lower the monthly payments will be because the repayment is spread over a longer period. However, this also means that the borrower will pay more in interest over the life of the loan, resulting in higher total costs.

When Comparing Two Installment Loans with the Same Principal and Annual