Question

Which loan should Reann Kiang take if she needs to borrow $8600 for 120 days?

A) 12% simple interest
B) 11% simple discount
C) Both loans are the same
D) Cannot be determined

Answer 1

Reann Kiang should take the 11% simple discount loan as it has a lower total amount due. Since the total amount for option B is lower than option A, Reann should take option B, the 11% simple discount loan.

Step-by-step explanation:

To determine which loan Reann Kiang should take, we need to calculate the total amount she would owe for each loan option.

A) For option A - 12% simple interest, we can calculate the interest using the formula:

Interest = Principal * Rate * Time

Interest = $8600 * 12% * (120/365)

Interest = $340.08

The total amount Reann would owe is $8600 + $340.08 = $8940.08

B) For option B - 11% simple discount, we can calculate the discount using the formula:

Discount = Principal * Rate * Time

Discount = $8600 * 11% * (120/365)

Discount = $265.15

The total amount Reann would owe is $8600 - $265.15 = $8334.85

Since the total amount for option B is lower than option A, Reann should take option B, the 11% simple discount loan.