Question

What is the difference between the amounts of interest Mary and Kyle paid for their loans?
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Answer 1

Option B: Difference between their amount of interest is $157.94.

Solution:

Mary's loan:

Principal = $10000, Rate of interest = 6.50%, Time = 4 years

n = 1 (compounded annually)

$A=P\left(1+\frac{r}{n}\right)^{n t}$

$A=10000\left(1+\frac{6.50\%}{1}\right)^{1 \times 4}$

$A=10000\left(1+\frac{6.50}{100}\right)^{ 4}$

$A=10000\left(\frac{106.50}{100}\right)^{ 4}$

A = $12864.66

Interest = Amount - Principal

             = $12864.66 -  $10000

Interest = $2864.66

Kyle's loan:

Principal = $10000, Rate of interest = 4.50%, Time = 6 years

n = 1 (compounded annually)

$A=P\left(1+\frac{r}{n}\right)^{n t}$

$A=10000\left(1+\frac{4.50\%}{1}\right)^{1 \times 6}$

$A=10000\left(1+\frac{4.50}{100}\right)^{ 6}$

$A=10000\left(\frac{104.50}{100}\right)^{ 6}$

A = $13022.60

Interest = Amount - Principal

             = $13022.60 -  $10000

Interest = $3022.60

Difference between their interest

            = $3022.60 - $2864.66

            = $157.94

The difference between the amount of interest Mary and Kyle paid for their loans is $157.94.

Option B is the correct answer.