Question

The Basics of Small Business FinancesGlacier Construction Company can pay off its loan in 20 months at 11% rather than 32 months at 10%, how much money will the company save on a loan of $30,000?

Answer 1

We need to find how much money the company would pay if they choose pay off its loan in 20 months at 11%

(11*30.000)/100 = 3300 of interest

Each month the company would have to pay (30000)/ (20) + 3300 = 4800,

(1500 + 3300) * 20 = 96000 money that the company would pay in 20 months at 11%

Then we need to find how much money the company would pay if they choose pay off its loan in 32 months at 10%

(10* 30.000)/100 = 3000 of interest

(30000 / 32 ) = 937.5 + 3000

(937.5 + 3000) * 32 = 126000 money that the company would pay in 32 months at 10%

To know how much money the company will save we make the next subtract = money that the company would pay in 20 months at 11% - money that the company would pay in 32 months at 10%

96000 - 126000 = -30000

we use 30000 in positive sing: 30000 total of money that the company will save using the loan in 20 months at 11%