The Cost of Financing: A Reflection on Decisions

What is the total cost of financing for Claire?

a) $325.00 b) $412.50 c) $687.50 d) $825.00

Final answer:

Claire will pay about $402.50 in interest over the course of the 24-month financing period at an APR of 11.5%, making the closest answer from the options provided $412.50.

Understanding the Decision: Calculating Total Cost of Financing

Reflecting on Claire's decision to finance the generator for 24 months at an APR of 11.5%, it is essential to break down the total cost of financing. The APR of 11.5% signifies the annual interest rate applied to the outstanding balance of the loan.

Given the 24-month loan term, which translates to 2 years, the APR will be applied twice throughout the financing period. To calculate the interest accrued, we multiply the cost of the generator ($1750) by the APR (0.115) and the loan duration in years (2).

Therefore, the calculation would be as follows: 1750 x 0.115 x 2 = $402.50. This amount represents the total cost of financing for Claire over the 24-month period.

Ultimately, Claire's decision to finance the generator involves paying an additional $402.50 in interest, making the closest answer from the options provided to be $412.50.