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12 June, 04:04

You need to borrow $1000. You can borrow it for 3 years at 8% simple interest, or for 2 years at 11% simple interest. Which loan will cost more? By how much?

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  1. 12 June, 04:35
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    He'll pay $ 20 more for the first loan.

    Step-by-step explanation:

    Since the loans are at a simple interest we can use this equation to compute the total amount that will be paid:

    M = C (1 + i*t)

    Where M is the total after interest, i is the rate at wich the loan was given and t is the amount of time.

    For the first loan:

    M = 1000 * (1 + 0.08*3) = 1000 * (1 + 0.24) = 1000 * (1.24) = 1240 $

    For the second loan:

    M = 1000 * (1 + 0.11*2) = 1000 * (1 + 0.22) = 1000 * (1.22) = 1220 $

    The difference in price on the loans is 1240 - 1220 = 20 $
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