Question

Due to your good​ credit, your bank reduces the interest rate on your ​12,000 loan from 9% to 7.5​% per year. Thanks to the​ change, how much will you save in interest this​ year?

The amount you will save in interest this year is $______________

Answer 1

Step-by-step explanation:

you have got a reduction of 1.5% (9%-7.5%) in your interest rate

So, if you multiply this value by the amount of the loan, you can know how much you will save this year.

Savings = $12,000 x 1.5%= $180

Another way to board the problem is the following:

With the initial interest rate of 9% you will would have to pay:

$12,000 x 9% = $1080

But now, with a reduced rated of 7.5% you only pay:

$12,000 x 7.5% = $900

Logically, the difference between these amounts will be what you save in the year

Savings=$1080-$900=$180