Sue can either borrow 10,000 dollars for 5 years with a simple interest of 7% annually or an interest which compounds annually for 6%. How much more money, rounded to the nearest dollar, would she have to pay back for the more expensive interest?

Lightning Aug 3, 2018

#1**0 **

If you assume that Sue will **NOT** pay any principal for 5 years, then:

7% x $10,000 x 5 years =**$3,500 - interest only @ 7% simple interest.**

$10,000 x 1.06^5 =$13,382.26 - $10,000 =**$3,382.26 - interest only @ 6% compounded annually.**

**$3,500 - $3,382 =$118 extra that Sue will pay on the $10,000 loan.**

Guest Aug 3, 2018

edited by
Guest
Aug 3, 2018