Jan and Stewart Jones plan to borrow $20,000 for a new car. They are trying to decide whether to take out a 4-year or 5-year simple interest loan. The 4-year loan has an interest rate of 6% and the 5-year loan has an interest rate of 6.25%. How much will they repay with the 5-year loan?
A. 2500
B.2600
C.26250
D.26500
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Answer:
(C) $26250
Step-by-step explanation:
Given:
Amount = $20,000
Interest rate for 5 years loan = 6.25% p.a. (Simple interest)
Find the interest for 1 year:
1 year interest = 6.25% x 20000
1 year interest = 0.0625 x 20000
1 year interest = $1250
Find the interest for 5 years:
1 year = $1250
5 years = 1250 x 5 = $6250
Find the total amount to be repaid:
Total = principal amount + interest
Total = 20000 + 6250 = $26,250
Answer: (C) $26250
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