Michelle wants to borrow $4,500. Bank A will lend Michelle the money at a simple annual interest rate of 9% for 6 years. Bank B will lend her the money at 11% for 4 years. Which bank would charge Michelle the least amount of interest? Explain.

Bank A:

A = 4500(1 + (0.09 × 6)) = 6930  

A = $ 6,930.00

The total amount accrued, principal plus interest,

from simple interest on a principal of $ 4,500.00

at a rate of 9% per year.

for 6 years is $ 6,930.00.

Bank B:  

A = 4500(1 + (0.11 × 4)) = 6480  

A = $ 6,480.00

The total amount accrued, principal plus interest,

from simple interest on a principal of $ 4,500.00

at a rate of 11% per year

for 4 years is $ 6,480.00.

So bank B would charge the least amount of interest.