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A consumer is comparing two short-term loan options to borrow $400:
- Loan A: A 10-day loan with a $40 finance charge.
- Loan B: A 30-day loan with a $60 finance charge.
The consumer calculates that Loan A costs $4 per day ($40 / 10 days) while Loan B costs $2 per day ($60 / 30 days), and concludes Loan B is the more cost-effective option. Why is this 'cost per day' analysis a potentially misleading way to determine the true cost of borrowing?
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- Loan Y: A 30-day loan with a $45 finance charge.
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A consumer is comparing two short-term loan options to borrow $400:
- Loan A: A 10-day loan with a $40 finance charge.
- Loan B: A 30-day loan with a $60 finance charge.
The consumer calculates that Loan A costs $4 per day ($40 / 10 days) while Loan B costs $2 per day ($60 / 30 days), and concludes Loan B is the more cost-effective option. Why is this 'cost per day' analysis a potentially misleading way to determine the true cost of borrowing?
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A person is comparing two short-term loan offers. Option A is a $500 loan for 30 days with a $60 finance charge. Option B is a $1000 loan for 60 days with a $100 finance charge. Which statement provides the most accurate analysis for determining the more cost-effective loan?
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