Question

Review the information given based on a principal balance of $8,000 to answer the question:

FICO Score Simple Interest Rate Total # of Payments Total Amount Paid
800–850 12% 29 $9,256.00
740–799 15% 33 $9,812.00
670–739 18% 38 $10,554.00
580–669 21% 48 $11,891.00
300–579 28% 60 $14,945.00


Calculate the percent increase in the amount of interest paid between a household with a 735 credit score and one with a 550 credit score. Round the final answer to the nearest tenth. (2 points)

17.2%

41.6%

171.9%

183.5%

Answer 1

(c) 171.9%

Explanation:

You want the percent increase in the interest paid on an $8000 loan for a credit score of 550 instead of 735. The total amounts repaid are $14945 and 10554, respectively.

Interest paid

The amount of interest paid is found by subtracting the principal amount of the loan from the total repaid:

score 550: 14945 -8000 = 6945

score 735: 10554 -8000 = 2554

Percent change

The percent change from the higher score is ...

(6945/2554 -1) · 100% ≈ (2.719 -1) · 100% = 171.9%

The percent increase in interest paid is 171.9%, matching choice C.

<95141404393>