Arian is about to borrow $3,474.82 from his uncle. He has an option to repay the loan at the end of year 5 with 11% simple interest per year or with 6.41% interest per year, compounded annually. What is the difference of the total interest paid over 5 years between the two options? (enter the answer as a positive number)
Solution
1) Interest paid when the principal is $3,474.82, time period is 5 years with 11% simple interest.
Interest paid = PRT = $3,474.82 * 5 * 0.11 = $1,911.15
2) Interest paid when the principal is $3,474.82, time period is 5 years with 6.41% interest compounded annually.
Interest paid = [$3,474.82 * (1.0641) 5 ] - $3,474.82 = $1,265.90
More interest is paid when loan is paid at 11% simple interest.
Difference between the interest = $1,911.15 - $1,265.90 = $645.25
I hope my solution solves your query.
Regards.
.
Arian is about to borrow $3-474-82 from his uncle- He has an option to.docx
1. Arian is about to borrow $3,474.82 from his uncle. He has an option to repay the loan at the end
of year 5 with 11% simple interest per year or with 6.41% interest per year, compounded
annually. What is the difference of the total interest paid over 5 years between the two options?
(enter the answer as a positive number)
Solution
1) Interest paid when the principal is $3,474.82, time period is 5 years with 11% simple interest.
Interest paid = PRT = $3,474.82 * 5 * 0.11 = $1,911.15
2) Interest paid when the principal is $3,474.82, time period is 5 years with 6.41% interest
compounded annually.
Interest paid = [$3,474.82 * (1.0641) 5
] - $3,474.82 = $1,265.90
More interest is paid when loan is paid at 11% simple interest.
Difference between the interest = $1,911.15 - $1,265.90 = $645.25
I hope my solution solves your query.
Regards.
![Arian is about to borrow $3,474.82 from his uncle. He has an option to repay the loan at the end
of year 5 with 11% simple interest per year or with 6.41% interest per year, compounded
annually. What is the difference of the total interest paid over 5 years between the two options?
(enter the answer as a positive number)
Solution
1) Interest paid when the principal is $3,474.82, time period is 5 years with 11% simple interest.
Interest paid = PRT = $3,474.82 * 5 * 0.11 = $1,911.15
2) Interest paid when the principal is $3,474.82, time period is 5 years with 6.41% interest
compounded annually.
Interest paid = [$3,474.82 * (1.0641) 5
] - $3,474.82 = $1,265.90
More interest is paid when loan is paid at 11% simple interest.
Difference between the interest = $1,911.15 - $1,265.90 = $645.25
I hope my solution solves your query.
Regards.](https://image.slidesharecdn.com/arianisabouttoborrow3-474-82fromhisuncle-hehasanoptionto-230128044724-317041b2/85/Arian-is-about-to-borrow-3-474-82-from-his-uncle-He-has-an-option-to-docx-1-320.jpg)
