Lauren wants to take out a $15,000 school loan and pay it back in 5 years. She shopped at two different banks. Bank A offered her an interest rate of 3.5% and Bank B offered her an interest rate of 4.5%. How much money will she save if she takes the loan out with Bank A?
$272.88
$279.65
$3,151.29
$406.15
To calculate the total amount Lauren will pay back for each bank:
Bank A:
Total amount = Principal + Total interest
Total amount = $15,000 + ($15,000 * 0.035 * 5)
Total amount = $15,000 + ($15,000 * 0.175)
Total amount = $15,000 + $2,625
Total amount = $17,625
Bank B:
Total amount = Principal + Total interest
Total amount = $15,000 + ($15,000 * 0.045 * 5)
Total amount = $15,000 + ($15,000 * 0.225)
Total amount = $15,000 + $3,375
Total amount = $18,375
Now, to calculate how much money Lauren will save by taking the loan out with Bank A:
Amount saved = Total amount with Bank B - Total amount with Bank A
Amount saved = $18,375 - $17,625
Amount saved = $750
Therefore, Lauren will save $750 if she takes the loan out with Bank A.