Wanda took out a personal loan for $16,000 at 9% simple interest.
How much interest will she pay after 5 years?
Suppose she pays off the loan in 3 years instead of 5 years. How much money will she save in interest?
I = PRT
I = 16,000 * 0.09 * 5
I = $7,200
Do the same for the three year period. Subtract to find the difference.
To calculate the interest Wanda will pay after 5 years, we'll use the formula for simple interest:
Interest = Principal * Rate * Time
where Principal is the initial amount borrowed, Rate is the annual interest rate, and Time is the number of years.
For Wanda's situation:
Principal = $16,000
Rate = 9% or 0.09 (converted to decimal)
Time = 5 years
Plugging in these values into the formula:
Interest = $16,000 * 0.09 * 5
Interest = $7,200
Therefore, Wanda will pay $7,200 in interest after 5 years.
Now let's calculate how much money she will save in interest by paying off the loan in 3 years instead of 5.
To calculate the interest saved, we'll subtract the interest paid after 3 years from the interest paid after 5 years.
Interest after 3 years:
Principal = $16,000
Rate = 0.09
Time = 3 years
Interest = $16,000 * 0.09 * 3
Interest = $4,320
Interest saved = Interest after 5 years - Interest after 3 years
Interest saved = $7,200 - $4,320
Interest saved = $2,880
Therefore, Wanda will save $2,880 in interest by paying off the loan in 3 years instead of 5 years.
To find out how much interest Wanda will pay after 5 years, we need to use the formula for simple interest:
Interest = Principal × Rate × Time
Where:
Principal = $16,000 (the initial loan amount)
Rate = 9% (in decimal form, 0.09)
Time = 5 years
Plugging these values into the formula, we have:
Interest = $16,000 × 0.09 × 5
Interest = $7,200
Therefore, Wanda will pay $7,200 in interest after 5 years.
Now, let's calculate how much money Wanda would save in interest if she pays off the loan in 3 years instead of 5 years.
To do this, we first need to find out the interest amount she would pay if she pays off the loan in 3 years. Again, using the simple interest formula:
Interest = Principal × Rate × Time
Where:
Principal = $16,000
Rate = 9% (in decimal form, 0.09)
Time = 3 years
Plugging in these values, we get:
Interest = $16,000 × 0.09 × 3
Interest = $4,320
Therefore, Wanda would pay $4,320 in interest if she pays off the loan in 3 years.
To calculate the amount of money she would save in interest, we subtract the interest paid in 3 years from the interest paid in 5 years:
Savings = Interest (5 years) - Interest (3 years)
Savings = $7,200 - $4,320
Savings = $2,880
Therefore, Wanda would save $2,880 in interest if she pays off the loan in 3 years instead of 5 years.