Ella is buying a motorcycle and is taking out a loan in the amount of $15,000. Her choices for the loan are a 36-month loan at 6.50% annual simple interest and a 48-month loan at 7.50% annual simple interest. What is the difference in the amount of interest Ella would have to pay for these two loans?

Question

Responses
A $1,025$1,025
B $1,275$1,275
C $1,575$1,575
D $2,925

Answer 1

To find the difference in the amount of interest paid for the two loans, we need to calculate the interest for each loan separately.

For the 36-month loan at 6.50% annual simple interest, the total interest paid would be:
$15,000 * 0.065 = $975 per year
$975 * 3 years = $2,925

For the 48-month loan at 7.50% annual simple interest, the total interest paid would be:
$15,000 * 0.075 = $1,125 per year
$1,125 * 4 years = $4,500

The difference in the amount of interest paid would be:
$4,500 - $2,925 = $1,575

Therefore, the answer is C) $1,575