Answer:
The difference in the amount of interest she would have to pay for the two loans is $1,400
Step-by-step explanation:
The amount of loan Holly is taking out, P = $10,000
The choices available for the loan are;
1) Loan duration, T₁ = 4-year
Interest rate, R₁ = 4%
2) Loan duration, T₂ = 6-year
Interest rate, R₂ = 5%
For the first choice, we have;
The simple interest, I, given by the formula;
[tex]I_1 = \dfrac{P \times R_1 \times T_1 }{100} = \dfrac{10,000 \times 4 \times 4 }{100} = \$ 1,600[/tex]
For the second choice, we have;
The simple interest, I, given by the formula;
[tex]I_2 = \dfrac{P \times R_2 \times T_2 }{100} = \dfrac{10,000 \times 5 \times 6 }{100} = \$ 3,000[/tex]
The difference, D, in the amount of interest she would have to pay for the two loans is therefore;
D = I₂ - I₁ = $3,000 - $1,600 = $1,400
The difference in the amount of interest she would have to pay for the two loans = D = $1,400.
