Question

3. You purchase a car using a $20,000 loan with a 5% simple interest rate.

(a) Suppose you pay the loan off after 4 years. How much interest do you pay on your loan? Show your work.

(b) Suppose you pay the loan off after 2 years. How much interest do you save by paying the loan off sooner? Show your work.

Answer:



PLZ HELP ASAP

Answer 1

a) The interest you pay on your loan is: $4,000

$20,000 x 5 x 4/100 = 4,000

b) The interest you save by paying off the loan early is: $2,000

$20,000 x 5 x 2/100 = 2,000

4,000 - 2,000 = 2,000

Answer 2

a) A = 20,000 [Principle] * (0.05 [Interest] * 4 [Number of years]) = $4,000 interest

b) A = 20,000 [Principle] * (0.05 [Interest] * 2 [Number of years]) = $2,000 interest