Question

Greg borrows $1975 at a simple interest rate of 5% for 3 years. Linda borrows $1975 at a simple interest rate of 4.5% for years. Who pays more interest at the end of their loan? How much more

Answer 1

Greg pays more interest than Linda

He pays $17.45 more

Explanation:

Greg

P=$1975

R=5%=0.05

T=3 years

Simple interest=P×R×T

=$1975×0.05×3

=$296.25

Linda

P=$1975

r=4.5%=0.045

n=1

t=3

Linda's Interest is compounded once per period, so we this formula

Compound Interest =P(1+r)^t

=$1975(1+0.045)^3

=$1975(1.045)^3

=$1975(1.141166125)

=$2,253.80

Interest paid=$2,253.80-$1975

=$278.8