Question

2. Darrell applied for a $5,200 loan from his credit union to purchase new office furniture. The simple annual interest rate on the loan is 5%. How much interest will Darrell save if he obtains the loan for 2 years instead of 2 1/2 years?

Answer 1

Answer: $130

Explanation:

Simple interest is calculated as:

= PRT/100

where P = principal = $5200

R = Rate = 5%

T = Time = 2 years

S.I = (PRT)/100

= (5200 × 5 × 2)/100

= 52000/100

= $520

Assuming the loan was obtained for 2 1/2 years, the simple Interest will be:

= (5200 × 5 × 2.5)/100

= 65000/100

= $650

This means he'll have saved:

= $650 - $520

= $130