Percent Increase and Decrease

Question 8 • DAEP - Math 7 A (20 DAY TERM)

Lamar is considering two loans. Loan ALoan BPrincipal$4,500$4,300Interest rate5%6%Time in years33Which loan will have the lowest total payback?

Answer

Loan A will have the lowest total payback because the amount of interest paid is less than the amount of interest paid for loan B.

Loan A will have the lowest total payback because the total of the principal and the interest paid for loan A is less than the same total for loan B.

Loan B will have the lowest total payback because the interest is less than the interest for loan A.

Loan B will have the lowest total payback because the total of the principal and the interest paid for loan B is less than the same total for loan A.

Explanation

Use simple interest, I = principal × rate × time. Loan A earns $4,500 × 0.05 × 3 = $675 in interest, for a total payback of $5,175. Loan B earns $4,300 × 0.06 × 3 = $774 in interest, for a total payback of $5,074. Although Loan B has more interest, its lower principal makes its total payback smaller, so Loan B has the lowest total payback.

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