Question

Two customers took out home equity loans.

-Cathy took out a 10-year loan for $20,00 and paid 5.20% annual simple interest
-Steven took out a 15-year loan for $20,000 and paid 4.80% annual simple interest

What is the difference between the amounts of interest Cathy and Steven paid for their loans?

A) $3,000
B) $4,000
C) $5,000
D) $6,000

Answer 1

Answer= b, $4000

Why?
Take the equation I=prt/100
I- is the interest
P- is known as principle, you can think of it in this example as the loan
R- the interest Rate
T- is time
In your problem the loan is 20,000 for both, so for both examples p=20,000
In the first problem the interest rate is 5.20% so for the first r=5.20 in the second your rate is 4.80% so in the second problem r=4.80.
Last is t, the first is a 10 year loan so t=10 for the first problem, the second problem has a 15 year loan so I’m the second problem t=15.

Now we have our problems:
I=(20,000•5.2•10)/100
And
I=(20,000•4.8•15)/100
Solve them and you get $10400 for the first and $14400 for the second. Now we just find the difference which is $4000 and that is our answer!

Answer 2

$4,000

Explanation:

The formula for determining simple interest is expressed as

I = PRT/100

Where I represents interest paid on the loan

.P represents the principal or amount taken as loan

R represents interest rate

T represents the duration of the loan in years.

Considering Cathy's loan, P = $20,000R = 5.2% T = 10 years I = (20000 × 5.2 × 10)/100 I = $10400

Considering Steven's loan, P = $20,000R = 4.8% T = 15 years I = (20000 × 4.8 × 15)/100 I = $14400

The difference between the amounts of interest Cathy and Steven paid for their loans is 14400 - 10400 = $4000