Based on the interest rates available to Michael, the option that would allow him to pay the least interest is B. 18-month loan with a 3.50% annual simple interest rate
How much interest will Michael pay?
The interest on the first option is:
= (7.25% x 12,000) x 12/12months in year
= $870
Interest on second loan:
= (3.5% x 12,000) x 18 / 12 months in year
= $630
Interest on third loan:
= (3.75% x 12,000) x 24/12 months in year
= $900
Interest on fourth loan:
= (2.75% x 12,000) x 36/12 Â months in year
= $990
In conclusion, the 18-month loan with a 3.50% annual simple interest rate gives the lowest rate.
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