Is elise correct? would prefer one contract over the other

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Reference no: EM133557898

Please provide clear calculations/expla nations, as indicated, for the following question. You can choose between two mortgage contracts: A. "You pay 2.50 percent APR paid monthly for the next 40 years". B. "You pay 7.50 percent APR paid quarterly for the next 40 years". Elise argues that "Under contract A you'd pay 25% twelve times per year, so that's 30.0% per year, and under contract B you'd pay 7.5% but only four times per year, so that's again 30.0% per year, thus the two controcts are equally good". Is Elise correct? Would prefer one contract over the other, and in that case, which contract would you prefer? Why?

Reference no: EM133557898

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