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Choosing a Loan


Two banks are offering car loans. You wish to borrow $5000. The fixed payments for each loan are $100 per month. Bank A charges 1 percent interest per month on the unpaid balance, the money you still owe to the bank. Bank B charges 1.5 percent interest per month on the unpaid balance and will throw in a $1000 television set, which you want. Which loan would you pick?



 Extensions

If neither bank loan was financially advantageous, then what interest rate should Bank B charge?

(Source: Mathematics Teaching in the Middle School, Feb 1997)



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