Julia needs a $7,800 loan in order to buy a car. Which loan option would allow her to pay the least amount of interest?
A 48-month loan with a 2.75% annual simple interest rate
A 24-month loan with a 3.25% annual simple interest rate
A 36-month loan with a 3.50% annual simple interest rate
A 30-month loan with a 3.00% annual simple interest rate
To determine the total amount of interest paid for each option, we can use the formula:
Total interest = (loan amount) x (annual interest rate) x (loan term in years)
Option 1: Total interest = $7,800 x 0.0275 x 4 = $858
Option 2: Total interest = $7,800 x 0.0325 x 2 = $507
Option 3: Total interest = $7,800 x 0.035 x 3 = $819
Option 4: Total interest = $7,800 x 0.03 x 2.5 = $585
Based on the calculations, it can be seen that the 24-month loan with a 3.25% annual simple interest rate would allow Julia to pay the least amount of interest, totaling $507.