Question

1.Wanda took out a personal loan for $5,000 at 9% simple interest. How much interest will she pay after 5 years?

(SHOW YOUR WORK)

2.Suppose she pays off the loan in 1 years instead of 5 years. How much money will she save in interest? (SHOW YOUR WORK)

Answer 1

1.) First, you use the formula for finding the simple interest, which is I = Prt

I = PRT
I = 5,000 x 0.09 x 5
I = 450 x 5
I = $2,250

2.) Since it says 1 year instead of 5, you multiply 450 by 1. So she only pays $450. To get how much money she'll save in interest, you subtract 2,250 by 450, which equals 1,800. So, she'll save $1,800 in interest.