Sarah needs a $3,500 loan in order to buy a car. Which loan option would allow her to pay the least amount of interest?
A 30-month loan with a 3.00% annual simple interest rate
A 36-month loan with a 3.50% annual simple interest rate
A 24-month loan with a 3.25% annual simple interest rate
An 18-month loan with a 3.75% annual simple interest rate
To determine which loan option would allow Sarah to pay the least amount of interest, we need to calculate the total amount of interest she would pay for each loan option.
1. For the 30-month loan with a 3.00% annual simple interest rate:
Total interest = $3,500 * 0.03 * (30/12) = $262.50
2. For the 36-month loan with a 3.50% annual simple interest rate:
Total interest = $3,500 * 0.035 * (36/12) = $367.50
3. For the 24-month loan with a 3.25% annual simple interest rate:
Total interest = $3,500 * 0.0325 * (24/12) = $227.50
4. For the 18-month loan with a 3.75% annual simple interest rate:
Total interest = $3,500 * 0.0375 * (18/12) = $131.25
Therefore, the loan option that would allow Sarah to pay the least amount of interest is the 18-month loan with a 3.75% annual simple interest rate, as she would only pay $131.25 in interest.