Question

Lin is taking out a loan in the amount of $575. Her choices for the loan are a 7-year loan at 4.5% simple interest and 8-year loan at 3.9% simple interest. What is the difference in the amount of 5% interest Lin would have to pay for each of these nd two loans? (Round to the nearest cent.)

Answer 1

Answer:  $1.73

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Explanation:

The simple interest formula is

i = P*r*t

that calculates the interest only

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Let's calculate how much interest Lin will pay back if she goes with the 7 year loan at 4.5% simple interest rate.

i = P*r*t

i = 575*0.045*7

i = 181.125

i = 181.13

Repeat for the other loan (8 years, 3.9% simple interest)

i = P*r*t

i = 575*0.039*8

i = 179.40

Subtract the results

181.13 - 179.40 = 1.73

She saves $1.73 if she goes with the second loan.