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1 February, 13:09

3. You purchase a car using a $20,000 loan with a 5% simple interest rate.

(a) Suppose you pay the loan off after 4 years. How much interest do you pay on your loan? Show your work.

(b) Suppose you pay the loan off after 2 years. How much interest do you save by paying the loan off sooner? Show your work.

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  1. 1 February, 13:15
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    (a) 20,000 * 5/100 * 4 = $4000 (interest)

    (b) 20000 * 5/100 * 2 = $2000 (interest)

    How much do you save = $4000 - $2000 = $2000
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