Michelle wants to borrow $2000. She has two options. Option 1 - she can borrow $2000 for 3 years at 7%. Option 2 - she can borrow $2000 for / years at 11%. Which loan will cost more?

Question

Mathematics

Ashlyn Walls

29 May, 12:32

Michelle wants to borrow $2000. She has two options. Option 1 - she can borrow $2000 for 3 years at 7%. Option 2 - she can borrow $2000 for / years at 11%. Which loan will cost more?

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Answers (1)

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Lauryn Steele · Answer 1

Option 1

Step-by-step explanation:

To find which will cost more, we need to know the amount of interest that will be on each loan

To get this, we use the general formula

I = PRT/100

Where P is the principal I. e $2,000 in both cases, R is the interest rate and T is the time.

We proceed as follows. For the first option

I = (2000 * 7 * 3) / 100 = $420

For the second option

I = (2,000 * 1 * 12) / 100 = $240

Option 1 is definitely more costly