Two thousand dollars is borrowed for one year at an interest

Two thousand dollars is borrowed for one year at an interest rate of 1.1% per month. If the same amount of money can be borrowed at an interest rate of 13.2% per year, how much could be saved in interest charges? 5-8 ($15 $18 $14 $16)

Solution

Principle amount browwed is P = $ 2,000

i) Interest rate per month is I = 1.1 %

Interested paid is N = PTI/100

where P = 2000 ; T = 12 months ; I = 1.1

    N = (2000*1.1*12)/100 = $ 264 of interest paid.

ii) Now if Interest on same principle amount is 13.2 per year

Interest paid is N = PTI/100

   where P = 2000 ; T = 1 ; I = 13.1

      N = (2000*1*13.1)/100 = $ 262

Saved Interest charges is N1 - N2 = 264 - 262 = $ 2