Question
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PART 2: SELECT YOUR FOOD TRUCK & SIMPLE INTEREST Name: Khadil TUThen
Congratulations on the purchase of your new food truck. You are considering three
different credit options shown below. Using your knowledge of simple interest, decide
which choice is the best option for you and explain why. (Be sure to use the cost of
the food truck that you decided on in Part 2.)
Trek Option1: a 4 year loan with simple interest
Q50,000
Total Amount Paid: 80,600 Interest Paid: 15,600 Monthly Payment

Ask by Jimenez Joseph. in the United States
Jan 23,2025

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Tutor-Verified Answer

Answer

Choosing the Best Credit Option for Your Food Truck

Name: Khadil TUThen
Recommendation:
After analyzing the three credit options using simple interest calculations, Option 2 is the best choice. It offers the lowest total amount paid (Q60,500) and, despite a higher monthly payment, provides the most cost-effective solution overall.
Why Option 2?
  • Lowest Total Interest: Q10,500
  • Shorter Loan Duration: 3 years
  • Affordable Monthly Payment: Q1,680.56
Alternative Option:
  • Option 3 offers lower monthly payments (Q1,041.67) and a slightly higher total interest (Q12,500), making it a good choice if you prioritize monthly affordability.
Final Decision: Choose Option 2 for its cost-effectiveness and shorter loan period, ensuring you minimize total interest and repay the loan quickly.

Considerations:
  • Assess Your Monthly Revenue: Ensure the monthly payment fits within your business’s income.
  • Maintain Emergency Funds: Keep a financial buffer for unexpected expenses.
  • Consult a Financial Advisor: Seek professional advice tailored to your specific situation.
By selecting Option 2, you’ll optimize your financial strategy for your new food truck business.

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Mind Expander

Did you know that simple interest is calculated using the formula ? In this case, is the principal amount (the amount you borrow), is the interest rate as a decimal, and is the time in years. It’s a straightforward way to understand how much extra you’ll pay on your loan over time. So for that loan at for years, your interest totals , making your total repayment .
When selecting the best loan option for your food truck venture, consider how much you can comfortably pay each month. Breakdown your finances to ensure that your monthly payment of fits into your anticipated income from the food truck. It’s crucial to calculate other potential expenses like fuel, food supplies, and market fees. If your monthly earnings are forecasted to exceed this payment comfortably, Option 1 could serve you well while you build up your business!

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