  ### Home > ACC7 > Chapter 7 Unit 4 > Lesson CC2: 7.1.8 > Problem7-90

7-90.

Ida wants to buy a car, but she currently does not have any money. The car she wants costs $\2500$. Consider her two options and decide which loan she should take.

1. She could borrow $\2500$ at a monthly interest rate of $4\%$ simple interest and pay the total after $12$ months. Write a simple-interest expression and calculate what she would owe at the end of $12$ months.

Use the equation for simple interest from the Math Notes box in this lesson.
$\text{Interest}=\textit{Prt}$ where:
$P=\text{Principal}$
$r=\text{rate}$
$t=\text{time}$

$\text{Interest}=(\2500)(0.04)(12\ \text{months})$
$(\2500)(0.04)=\100$ dollars per month in interest
$(\100)(12\ \text{months})=\1200$ interest over $12$ months

How much total money does Ida owe under this option if her borrowed amount is $\2500$ and her interest would be $\1200$?

2. She could borrow $\2500$ at a weekly interest rate of $1\%$ simple interest and pay the total after $12$ months. Show calculations and a written explanation to justify your answer.

Use the same interest formula from part (a).
$\text{Interest}=\left(\text{principal}\right)\left(\text{interest rate}\right)\left(\text{weeks in a year}\right)$

There are $52$ weeks in a year.

Ida owes $\3800$ with this option. Be sure to show how to get this answer and explain which one of the two loan options is better and why.