+1245 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?
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.
