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

ASuppose you pay the loan off after 4 years. How much interest do you pay on your loan? Show your work.

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

Answer:




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Verified Answer :

KBonacker
AA = 20,000 [Principle]  (0.05 [Interest]  4 [Number of years]) = $4,000 interest

b) A = 20,000 [Principle] * (0.05 [Interest] * 2 [Number of years]) = $2,000 interest

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