The required formula to calculate the interest is given by is given by:
[tex]\begin{gathered} I=P(1+\frac{r}{n})^{nt}-P \\ P\text{ = Initial Principal Balance} \\ r=\text{ interest rate} \\ n=\text{ number of times interest applied per time year} \\ t=\text{ the number of years} \end{gathered}[/tex]
Convert 6.95% to decimal:
[tex]0.0695[/tex]
Substitute n=12, t=4, P = 65000, and r = 0.0695 into the equation:
[tex]\begin{gathered} I=65000(1+\frac{0.0695}{12})^{12\times4}-65000 \\ I\approx20762.80 \end{gathered}[/tex]
Therefore, the interest paid on the first option is approximately $20762.80
Using a similar procedure, it is found that the interest paid on the second option is approximately $20201.74
Therefore, the better deal is the second option and the interest paid is $20201.74
