To find the amount of interest that the couple can save by choosing the 20-year loan, we need to calculate the total interest paid for both loans and then compare them.
Let's start by calculating the total interest paid for the 30-year loan.
The formula to calculate the total interest paid for a loan is:
Total Interest = (Loan Amount * Interest Rate * Loan Period) - Loan Amount
Using the given values:
Loan Amount = $100,000
Interest Rate = 8% (which can be written as 0.08)
Loan Period = 30 years
Total Interest for 30-year loan = ($100,000 * 0.08 * 30) - $100,000
Next, let's calculate the total interest paid for the 20-year loan.
Using the same formula:
Loan Amount = $100,000
Interest Rate = 8% (0.08)
Loan Period = 20 years
Total Interest for 20-year loan = ($100,000 * 0.08 * 20) - $100,000
Now that we have calculated the total interest paid for both loans, we can find the amount of interest that the couple can save by choosing the 20-year loan. We subtract the total interest paid for the 20-year loan from the total interest paid for the 30-year loan.
Interest Saved = Total Interest for 30-year loan - Total Interest for 20-year loan
By performing the calculations, you can find the amount of interest the couple can save by choosing the 20-year loan.