A person needs a washer/dryer combo for $2000.00 He pays it for the next 3 yeas at a simple interest rate of 15%. If he paid in full today, how much would he have saved?

Answer 1

To determine how much the person would save if he paid for the washer/dryer combo in full today versus paying over three years with simple interest, we first need to calculate the total amount he would pay if he financed it with simple interest.

1. Calculating the total interest over 3 years:

   • Principal (P) = $2000.00
   • Rate (R) = 15% per year (expressed as a decimal = 0.15)
   • Time (T) = 3 years

   The formula for simple interest is: \[ \text{Interest} = P \times R \times T \]

   Plugging in the values: \[ \text{Interest} = 2000 \times 0.15 \times 3 = 2000 \times 0.45 = 900 \]

2. Calculating the total amount paid over 3 years: \[ \text{Total Amount Paid} = \text{Principal} + \text{Interest} = 2000 + 900 = 2900 \]

3. Calculating the savings from paying in full today: If he pays in full today, he pays $2000. If he pays over 3 years, he pays $2900.

   The savings are: \[ \text{Savings} = \text{Total Amount Paid (over 3 years)} - \text{Payment today} = 2900 - 2000 = 900 \]

Thus, if he paid in full today, he would save $900.00.