Question

Two customers took out home equity loans. • Cathy took out a 10-year loan for $20,000 and paid 5.20% annual simple interest • Steven took out a 15-year loan for $20,000 and paid 4.80% annual simple interest What is the difference between the amounts of interest Cathy and Steven paid for their loans? A) $3,000 B) $4,000 C) $5,000 D) $6,000

Answer 1

Answer:

the answer is B $4,000

Step-by-step explanation: Apply the formula I = Prt, where I is interest, P is principle, r is rate, and t is time.

I = 20,000(

5.2

100

)(10) = 20,000(0.052)(10) = 10,400

I = 20,000(

4.8

100

)(15) = 20,000(0.048)(15) = 14,400

Therefore, 14,400 − 10,400 = 4,000

Answer 2

Answer: B) $4,000

Step-by-step explanation:

The formula for determining simple interest is expressed as

I = PRT/100

Where

I represents interest paid on the loan.

P represents the principal or amount taken as loan

R represents interest rate

T represents the duration of the loan in years.

Considering Cathy's loan,

P = $20,000

R = 5.2%

T = 10 years

I = (20000 × 5.2 × 10)/100

I = $10400

Considering Steven's loan,

P = $20,000

R = 4.8%

T = 15 years

I = (20000 × 4.8 × 15)/100

I = $14400

The difference between the amounts of interest Cathy and Steven paid for their loans is

14400 - 10400 = $4000