Question

Holly is taking out a loan in the amount of 10,000 her choices for the loan or a 4-year loan at 4% simple interest and a 6 year loan at 5% interest what is the difference in the amount of interest Hollywood have to pay for each of two loans

Answer 1

Given a loan with principal amount, P, time, T, in years and rate, R %,

the interest I is given by

`I=(PRT)/(100)`

For the 4-year loan,

P = $10000, R = 4%, T = 4years

`I=(10000*4*4)/(100)=\text{ \$1600}`

For the 6-year loan,

P = $10000, R = 5%, T = 6years,

therefore,

`I=(10000*5*6)/(100)=\text{ \$3000}`

Hence,

the difference = $3000 - $1600 = $1400