Define the term LOAN according to the context. Manually calculate the total amount he will pay back to the bank at the end of 24 months for Option 1. Calculate your answer for 1.2 and total amount for Option 2 to help Musa choose the best option.

Step 1: Define LOAN. A loan is a sum of money borrowed by one party from another, which is expected to be repaid with interest over a specified period. In this context, Musa borrows money to buy tiles for his house.

Step 2: Calculate the total amount for Option 1. For Option 1, the loan is R5 000 at 2.8% per annum, compounded yearly for 24 months (2 years). The formula for compound interest is $A = P(1 + r)^t$. Given: $P = R5\,000$ $r = 2.8\% = 0.028$ $t = 2 \text{ years}$

Substitute the values into the formula: $A = 5000(1 + 0.028)^2$ $A = 5000(1.028)^2$ $A = 5000(1.056784)$ $A = 5283.92$ The total amount for Option 1 is R5 283.92.

Step 3: Calculate the total amount for Option 2. For Option 2, the loan is R5 000 at 9.5% per annum simple interest for 2 years. The formula for simple interest is $A = P(1 + rt)$. Given: $P = R5\,000$ $r = 9.5\% = 0.095$ $t = 2 \text{ years}$

Substitute the values into the formula: $A = 5000(1 + 0.095 \times 2)$ $A = 5000(1 + 0.19)$ $A = 5000(1.19)$ $A = 5950$ The total amount for Option 2 is R5 950.00.

Step 4: Compare the options and choose the best one. Option 1 total amount: R5 283.92 Option 2 total amount: R5 950.00

Musa should choose the option that requires him to pay back the least amount of money. Since R5 283.92 < R5 950.00, Option 1 is the better choice.

The final answer is $\boxed{Option 1 is better, with a total repayment of R5 283.92}$.

Send me the next one 📸