Question

Hannah is taking out a loan in the amount

of $12,000. Her choices are a 3-year loan
at 6% simple interest and a 5-year loan at
7.5% simple interest. What is the difference
in the amount of interest Hannah would
have to pay on these two loans?
A. $2,290
B. $2,340
C. $2,410
D. $2,470

Answer 1

Explanation:

For the 3-year loan at 6% simple interest:

Interest = Principal x Rate x Time

Interest = 12,000 x 0.06 x 3

Interest = $2,160

For the 5-year loan at 7.5% simple interest:

Interest = Principal x Rate x Time

Interest = 12,000 x 0.075 x 5

Interest = $4,500

The difference in the amount of interest Hannah would have to pay on these two loans is:

$4,500 - $2,160 = $2,340

So the answer is (B) $2,340.