Exam question help

[dream chaser]

Hi Guys,

Why is the answer D and not A?

I put the following into the financial solver on my CAS

Loan I:
N=52
I=12.6
PV=5000
Pmt=?
FV=0
PpY=52
CpY=52

I solved for Pmt and got -102.455.

Loan IV:
N=4
I=12.7
PV=5000
Pmt=?
FV=0
PpY=4
CpY=4

I solved for Pmt and got -1350.769.

Then I found the total amount paid for each loan
Loan I: 102.455 x 52 = $5327.66
Loan IV: 1350.769 x 4 = $5403.08

What have I done wrong? All help will be much appreciated. Thanks 

[Ascend.edu]

Hi dreamchaser,
This question isn't really a financial solver question per se!

It is a question about the effective interest rate, using the function eff( Interest rate, compound periods per year). on your cas

In simple terms, the effective interest rate is the equivalent simple interest rate for the year for your compound interest rate.

Now in this case, as you have a loan, you would like the interest rate to be as low as possible eliminating
B and C , as A has the same compounding periods
E as D has the same amount of compounding periods

So you would test eff(12.6,52)
and
eff(12.7,4)

The answer should be D.

I think this should be your answer

[dream chaser]

Hi dreamchaser,
This question isn't really a financial solver per se!

It is a question about the effective interest rate, using the function eff( Interest rate, compound periods per year). on your cas

In simple terms, the effective interest rate is the equivalent simple interest rate for the year for your compound interest rate.

Now in this case, as you have a loan, you would like the interest rate to be as low as possible eliminating
B and C , as A has the same compounding periods
E as D has the same amount of compounding periods

So you would test eff(12.6,52)
and
eff(12.7,4)

The answer should be D.

I think in your answer

Thank you Ascend.edu. I really appreciate the help