Question

A customer borrowed $2000 and then a further $1000 both repayable in 12 months. What should he have saved if he had taken out one loan for $3000 repayable in 12 months?Rates loans between $0- $2,500 are 10%Rates loans between $2,501- $7,500 are 8%a. $60b. $240c. $300d. $360e. $540

Answer 1

GIVEN:

We are told that a customer borrowed $2000 and then $1000 both at the rate of 10% for 1 year.

Required;

To determine how much he would have saved if he had taken a loan of $3000 at the rate of 8% for 1 year instead.

Step-by-step solution;

We will calculate the interest charged on the loans of $2000 and $1000 as follows;

$\begin{gathered} Int_{2k}=P\times R\times T \\ \\ Where\text{ }you\text{ }have: \\ P=principal(2000),R=rate(10\%),T=time(1\text{ }year) \\ \\ Int_{2k}=2000\times0.10\times1 \\ \\ Int_{2k}=200 \end{gathered}$

Also, we have;

$\begin{gathered} Int_{1k}=P\times R\times T \\ \\ Int_{1k}=1000\times0.10\times1 \\ \\ Int_{1k}=100 \end{gathered}$

This means the interest payable on both loans will be $300 (200 + 100).

To determine the amount of interest payable on the loan of $3000;

$\begin{gathered} Int_{3k}=P\times R\times T \\ \\ Int_{3k}=3000\times0.08\times1 \\ \\ Int_{3k}=240 \end{gathered}$

Observe that the customer would be paying less if he had taken one sum of $3000 at the rate of 8%, and therefore the amount he would have saved is;

$\begin{gathered} Int\text{ }saved=300-240 \\ \\ Int\text{ }saved=60 \end{gathered}$

ANSWER:

Option A is the correct answer. The customer would have saved $60