Question

tvm and changing parameters
summarize the effects on the overall cost of purchasing when different parameters are changed.
if you increase the length of borrowing time...
if you increase the increase the interest rate...
if you increase the frequency of your payments....
if you increase your down payment...

Explanation:

To summarize the effects on the overall cost of purchasing when parameters change (TVM - Time Value of Money context):

1. Increasing borrowing time: More time means more interest accrual (since interest is charged over time), so the total cost (principal + interest) increases.
2. Increasing interest rate: A higher rate means more interest per period. Over the borrowing term, total interest (and thus total cost) increases.
3. Increasing payment frequency: More frequent payments (e.g., monthly vs. annual) reduce the principal balance faster, lowering the amount of interest accrued over time. Thus, total cost decreases.
4. Increasing down payment: A larger down payment reduces the loan principal. With less principal to pay interest on, total interest (and total cost) decreases.

Answer:

• Increasing borrowing time: Total cost increases (more interest over time).
• Increasing interest rate: Total cost increases (higher interest charges).
• Increasing payment frequency: Total cost decreases (faster principal reduction, less interest).
• Increasing down payment: Total cost decreases (lower loan principal, less interest).