Josh is buying a RV and is taking out a loan in the amount of $20,000. His choices for the loan are a 5-year loan at 6.00% annual simple interest and a 6-year loan at 7.00% annual simple interest. What is the difference in the amount of interest Josh would have to pay for these two loans? A) $1,200 B) $2,000 Eliminate C) $2,400 D) $3,000

Question

Mathematics

Beckett Henson

29 May, 02:42

Josh is buying a RV and is taking out a loan in the amount of $20,000. His choices for the loan are a 5-year loan at 6.00% annual simple interest and a 6-year loan at 7.00% annual simple interest. What is the difference in the amount of interest Josh would have to pay for these two loans? A) $1,200 B) $2,000 Eliminate C) $2,400 D) $3,000

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Answers (1)

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Jillian Choi · Answer 1

Answer: C) $2,400

Step-by-step explanation:

The formula for simple interest is expressed as

I = PRT/100

Where

P represents the principal

R represents interest rate

T represents time in years

I = interest after t years

Considering the 5-year loan

T = 5 years

P = $20000

R = 6%

Therefore

I = (20000 * 6 * 5) / 100

I = 600000/100

I = $6000

Considering the 6-year loan

T = 6 years

P = $20000

R = 7%

Therefore

I = (20000 * 7 * 6) / 100

I = 840000/100

I = $8400

The difference in the amount of interest Josh would have to pay for these two loans is

8400 - 6000 = $2400