Question

Al and Angela both took out loans from the bank for $2,000 to help with their bills. Al's loan was calculated with a simple interest rate of 14% and Angela's loan had an interest rate of 13% that compounded annually. They each paid off their loans in 5 years. Who repaid the bank more money and how much more did they repay?

Answer 1

Angela $3680

Explanation:

For Al's loan (simple interest )

p=$2000

rate=14%= 14/100= 0.14

time t= 5years

A=p(1+rt)]

A=2000(1+0.14*5)

A=2000(1+0.7)

A=2000(1.7)

A=$3400

For Angela loan (compounded interest )

p=$2000

rate=13%= 14/100= 0.13

time t= 5years

A=p(1+r)^t

A=2000(1+0.13)^5)

A=2000(1+0.13)^5

A=2000(1.13)^5

A= 2000*1.84

A=$3680

Angela repaid more