Question

Madeline is comparing her options to borrow $5,000 to buy inventory and equipment for her

new sub sandwich shop. Which loan appears to be the best deal? (Hint: Use the simple
interest formula to estimate the interest.)
O 7 percent interest loan due in two years
No answer text provided.
O 10 percent interest due in one year
O 8 percent interest due in 18 months

Answer 1

• 10 percent interest due in one year

Step-by-step explanation:

Simple interest calculates interests using the formula below.

I= p x r x t

Where P = principal amount

r = interest rate

t= time in years

A). p= $5000, r= 7% or 0.07, t= 2 years

I = $5000 x 0.07 x 2

I = $5000 x 0.14

I= $700

B). p= $5000, r= 10% or 0.10 , t= 1

I = $5000 x 0.10 x 1

I= $500

c). P= $5000, r= 8% or 0.08, t= 18months or 1.5years

I= $5000 x 0.08 x 1.5

I=$400x 1.5

I=$600

Option B is the better deal. The interest amount is $500, which is the lowest amongst all the options.