Question

A customer will borrow $12,000 to buy a car. Which loan option would allow the customer to pay the least amount of interest

Answer 1

The loan option that would allow the customer pay the lowest amount of interest is loan f.

What is simple interest?

Simple interest rate is the interest that is paid only on the principal of a loan. The debtor does not pay interest on the interest rate already accrued.

Simple interest = principal x time x interest rate

What is the simple interest of each option?

• Option f: 12,000 x 0.052 x 4 = 2496
• Option g: 12,000 x 0.042 x 5 = 2520
• Option h: 12,000 x 6 x 0.047 = 3,384
• Option j: 12,000 x 3 x 0.084 = 3,024

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