new homeowner needs to buy a washer and dryer set for $2,000.00. The store says they can pay for the appliances in full today, or they can pay over the next 3 years at a 15% simple interest rate. How much will the homeowner save by paying in full today? (1 point)

Question

$45.00

$2,900.00

$6.75

$900.00

Answer 1

To determine how much the homeowner would save by paying in full today instead of using the financing option, we need to calculate the total cost when the appliances are financed over 3 years at a 15% simple interest rate.

The formula for simple interest is:

\[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} \]

Here, the principal is $2,000, the rate is 15% (or 0.15), and the time is 3 years.

1. Calculate the interest:

\[ \text{Interest} = 2000 \times 0.15 \times 3 = 2000 \times 0.45 = 900 \]

2. Add the interest to the principal to find the total payment:

\[ \text{Total Cost} = \text{Principal} + \text{Interest} = 2000 + 900 = 2900 \]

3. Now compare the full payment today ($2,000) with the total cost when financed ($2,900):

\[ \text{Savings} = \text{Total Cost} - \text{Full Payment} = 2900 - 2000 = 900 \]

Thus, the homeowner saves $900.00 by paying in full today.

The correct answer is:

$900.00