Rita needs a $7,500 personal loan. Which loan option would allow her to pay the LEAST amount of interest?
Responses
A A 24-month loan with a 6.50% annual simple interest rate.A 24-month loan with a 6.50% annual simple interest rate.
B A 36-month loan with a 4.00% annual simple interest rate.A 36-month loan with a 4.00% annual simple interest rate.
C A 48-month loan with a 3.50% annual simple interest rate.A 48-month loan with a 3.50% annual simple interest rate.
D A 60-month loan with a 3.00% annual simple interest rate.
To determine which loan option would allow Rita to pay the least amount of interest, we need to calculate the total interest for each option and compare them.
Option A:
Loan amount: $7,500
Simple interest rate: 6.50% per year
Loan period: 24 months
Total interest = Loan amount * (interest rate/100) * loan period
Total interest = $7,500 * (6.50/100) * 2
Total interest = $975
Option B:
Loan amount: $7,500
Simple interest rate: 4.00% per year
Loan period: 36 months
Total interest = Loan amount * (interest rate/100) * loan period
Total interest = $7,500 * (4.00/100) * 3
Total interest = $900
Option C:
Loan amount: $7,500
Simple interest rate: 3.50% per year
Loan period: 48 months
Total interest = Loan amount * (interest rate/100) * loan period
Total interest = $7,500 * (3.50/100) * 4
Total interest = $1,050
Option D:
Loan amount: $7,500
Simple interest rate: 3.00% per year
Loan period: 60 months
Total interest = Loan amount * (interest rate/100) * loan period
Total interest = $7,500 * (3.00/100) * 5
Total interest = $1,125
Based on the calculations, Option B, a 36-month loan with a 4.00% annual simple interest rate, would allow Rita to pay the least amount of interest, which is $900.
To determine which loan option would allow Rita to pay the least amount of interest, we need to calculate the total interest paid for each loan option. Here are the calculations:
Loan Option A:
Principal = $7,500
Interest Rate = 6.50%
Time = 24 months
Total Interest Paid = Principal * Interest Rate * Time
Total Interest Paid = $7,500 * 6.50% * 24
Total Interest Paid = $7,500 * 0.065 * 24
Total Interest Paid = $11,700
Loan Option B:
Principal = $7,500
Interest Rate = 4.00%
Time = 36 months
Total Interest Paid = Principal * Interest Rate * Time
Total Interest Paid = $7,500 * 4.00% * 36
Total Interest Paid = $7,500 * 0.04 * 36
Total Interest Paid = $10,800
Loan Option C:
Principal = $7,500
Interest Rate = 3.50%
Time = 48 months
Total Interest Paid = Principal * Interest Rate * Time
Total Interest Paid = $7,500 * 3.50% * 48
Total Interest Paid = $7,500 * 0.035 * 48
Total Interest Paid = $10,080
Loan Option D:
Principal = $7,500
Interest Rate = 3.00%
Time = 60 months
Total Interest Paid = Principal * Interest Rate * Time
Total Interest Paid = $7,500 * 3.00% * 60
Total Interest Paid = $7,500 * 0.03 * 60
Total Interest Paid = $10,800
Based on these calculations, the loan option that would allow Rita to pay the least amount of interest is Option C, which is a 48-month loan with a 3.50% annual simple interest rate.
To determine which loan option would allow Rita to pay the least amount of interest, we need to calculate the total interest for each loan option.
To calculate the total interest, we can use the formula:
Total Interest = Loan Amount × Interest Rate × Loan Term
Let's calculate the total interest for each loan option:
For option A (24-month loan with a 6.50% annual simple interest rate):
Total Interest A = $7,500 × 0.065 × 24 = $11,700
For option B (36-month loan with a 4.00% annual simple interest rate):
Total Interest B = $7,500 × 0.04 × 36 = $10,800
For option C (48-month loan with a 3.50% annual simple interest rate):
Total Interest C = $7,500 × 0.035 × 48 = $12,600
For option D (60-month loan with a 3.00% annual simple interest rate):
Total Interest D = $7,500 × 0.03 × 60 = $13,500
Now, we can see that option B has the lowest total interest of $10,800. Therefore, option B - A 36-month loan with a 4.00% annual simple interest rate - would allow Rita to pay the least amount of interest on her $7,500 personal loan.