Question

ason and Liam both applied for an auto loan at Earnest Bank. Jason has a credit score of 690. Liam has a credit score of 580. The bank approved Jason’s loan application at 4.40% interest. Liam was approved for the same loan amount, but because of his poor credit rating the interest charged on Liam’s loan is 4 percentage points higher than the interest rate on Jason’s loan. What interest rate does Liam pay for the car loan?

Answer 1

Liam's interest rate for the car loan is 8.40%, which is 4 percentage points higher than Jason's interest rate of 4.40% due to his lower credit score.

Step-by-step explanation:

The question asks us to determine Liam's interest rate for an auto loan from Earnest Bank, given that Jason has an interest rate of 4.40% and Liam's rate is 4 percentage points higher due to his lower credit score. Since Jason's interest rate is 4.40%, we simply need to add 4 percentage points to this to find Liam's rate.

To calculate, we start with Jason's interest rate:

• Jason's interest rate: 4.40%
• Liam's interest rate: Jason's rate + 4 percentage points = 4.40% + 4.00% = 8.40%

Thus, Liam will pay an interest rate of 8.40% for the car loan.