Question

A veterinary student takes a loan to pay for the last year of school. the loan is $25,000 at 3.25 percent to be paid back over 10 years how much interest will be paid? if the student chose to pay back the loan in 7 years instead. how much interest would be saved?

Answer 1

If he had paid the loan in 7 years instead of 10 years, he could have saved $2437.50

Solution-

As we are not provided with the compounding rate, so considering as simple interest with 3.25% annual interest rate.

we know,

`i=(P* R* t)/(100)`

For 10 years,

`i_1=(25000* 3.25* 10)/(100)=8125`

For 7 years,

`i_2=(25000* 3.25* 7)/(100)=5687.50`

The extra interest paid by him is,

`=8125-5687.50=2437.5`

Therefore, if he had paid the loan in 7 years instead of 10 years, he could have saved $2437.50