Belle had the choice of taking out a four year car loan at 8.5% simple interest or a Five year loan at 7.75% simple interest. If she borrows $15,000, how much interest would she pay for each loan? Which option requires less interest?
I = PRT
I = 15,000 * 0.0775 * 5
I = $5,812.50
Do the same for the four-year loan.
1127
To calculate the interest for each loan, we'll use the formula:
Interest = Principal x Rate x Time
For the four-year car loan at 8.5% simple interest:
Interest = $15,000 x 0.085 x 4
Interest = $5100
Therefore, Belle would pay $5100 in interest for the four-year car loan at 8.5% simple interest.
For the five-year car loan at 7.75% simple interest:
Interest = $15,000 x 0.0775 x 5
Interest = $5775
Therefore, Belle would pay $5775 in interest for the five-year car loan at 7.75% simple interest.
From the calculations, we can see that the four-year car loan at 8.5% simple interest requires less interest, which is $5100.
To find out the interest Belle would pay for each loan, we can use the simple interest formula:
Interest = Principal x Rate x Time
For the first loan:
Principal = $15,000
Rate = 8.5% (or 0.085)
Time = 4 years
Using the formula:
Interest = $15,000 x 0.085 x 4
Interest = $5,100
Therefore, Belle would pay $5,100 in interest for the four-year car loan at 8.5% simple interest.
For the second loan:
Principal = $15,000
Rate = 7.75% (or 0.0775)
Time = 5 years
Using the formula:
Interest = $15,000 x 0.0775 x 5
Interest = $5,812.50
Therefore, Belle would pay $5,812.50 in interest for the five-year loan at 7.75% simple interest.
Comparing the two options, Belle would have to pay less interest for the first loan, which is the four-year car loan at 8.5% simple interest.