Richard needs to borrow $33932 and has narrowed his search for a loan to two banks. The first bank offers 51-month simple interest loans at an annual rate of 4.4%. The second bank offers 55-month simple discount loans at an annual rate of 4.9%. Assuming he chooses the bank that will lead to the smaller maturity value, what will the maturity value be?

Levi Rasmussen

Levi Rasmussen

Answered question

2022-07-28

Richard needs to borrow $33932 and has narrowed his search for a loan to two banks. The first bank offers 51-month simple interest loans at an annual rate of 4.4%. The second bank offers 55-month simple discount loans at an annual rate of 4.9%. Assuming he chooses the bank that will lead to the smaller maturity value, what will the maturity value be?

Answer & Explanation

Danica Ray

Danica Ray

Beginner2022-07-29Added 15 answers

Step 1
S = simple interest
P = Principal
r = rate
t = time
here P = $ 33932
first bank, r = 4.4 % , t = 51 12 years
S = 33932 × 4.4 100 × 51 12
= $ 6345.28
Step 2
for 1st bank simple interest loan is $6345.28
2nd bank, r = 4.9 % , t = 55 12 years.
S = 33932 × 4.9 100 × 55 12
= $ 7620.56
Richard chooses smaller maturity value.
So, he chooses 1st bank, with maturity $5645.28

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