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7 July, 17:55

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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  1. 7 July, 18:28
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    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
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