Question

John Dough has just been awarded his degree in business. He has three education loans outstanding. They all mature in 5 years and he can repay them without penalty any time before maturity. The amounts owed on each loan and the annual interest rate associated with each loan are given in the following​ table:

Loan	Balance due		Annual interest rate
1	​$26,000		4.74.7​%
2	​$5,000		7.77.7​%
3	​$33,000		3.73.7​%

John can also combine the total of his three debts​ (that is,​ $64,000) and create a consolidated loan from his bank. His bank will charge an annual interest rate of

3.6 %3.6%

for a period of 5 years. Should John do nothing​ (leave the three individual loans as​ is) or create a consolidated loan​ (the $64,000​ question)?

Answer 1

­SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

06:49 W @v a 1x 2 ENG E 23-03-2020 27 ... o X 1050 X ✓ fx IN 10 P i Q IR IS IT JU V A 31 32 33 34 35 36 INTEREST RATE BALANCE DUE 37 LOAN WEIGHTS 38 WEIGHTED RATE A*C 1.91% 0.60% 1.91% 39 1 40 2 3 4.70% 7.70% 3.70% 26000 5000 33000 64000 0.4063 0.0781 0.5156 [26000/64000] [5000/64000] [33000/64000] 11 42 43 WEIGHTED RATE = 4.42% 44 ANSWER 45 AS WEIGHTED RATE IS HIGHER THAN RATE OFFERED BY BANK(3.6%) HE SHOULD CONSOLIDATE HIS LOAN 50 51 52 53 54 ... cash opti LINE OF CREDIT Sheet5 eoq miller CARD BANKER ACCEPTANC FACTOR SI DISC FOCAL WC REQUIRE Sheet3 Sheet4 + 7