Ward finances $20,000 to purchase a car. If he gets a 2. 5% interest rate regardless of loan length, how much interest will Ward save if he finances the $20,000 for 3 years rather than 5 years? A) $1,000 B) $10,000 C) $333. 33 D) $3,333. 33.

Simple interest is the amount charged on the principal amount with a fixed rate of interest for a time period. Simple interest calculated only on the principal amount.

The formula for the simple interest can be given as,

[tex]I=\dfrac{Prt}{100}[/tex]

Here, (I) is the interest amount earned on the principal amount of (P) with the rate of (r) in the time period of (t).

Ward finances $20,000 to purchase a car. The rate of interest is 2.5% regardless of loan length. The interest amount of the car for three years is,

[tex]I_3=\dfrac{20000\times2.5\times3}{100}\\I_3=1500[/tex]

The interest amount of the car for five years is,

[tex]I_3=\dfrac{20000\times2.5\times5}{100}\\I_3=2500[/tex]

The amount of interest Ward save,

[tex]C=2500-1500\\C=1000[/tex]

Thus, the total amount of interest will Ward save if he finances car the $20,000 for 3 years rather than 5 years is $1000.

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