Question

Henry took out a 4-year loan for $5,000 and paid 4.2% annual simple interest.• Ingrid took out a 6-year loan for $5,000 and paid 3.9% annual simple interest.

Answer 1

$1920

1) Since Henry took out a

4 year

5,000

paid 4.2% simple interest

2) We can calculate the interest through this formula:

$\begin{gathered} A=P(1+rt) \\ A_H=5000(1+0.042\times4) \\ A_H=5840 \\ \end{gathered}$

Subtracting 5000 from 5840, Henry will have to pay: $840

2.2) Ingrid

$\begin{gathered} I=5000\times0.039\times6 \\ I=1080 \end{gathered}$

Adding it all up we have for Ingrid and Henry:

$1080 +$840=$1920

3) Hence the accumulated interest that Henry and Ingrid had to pay is $1920