Answer :
To determine the solutions, we need to follow these steps:
1. Calculate the profit that the bank would earn if a customer was charged a 15% interest rate over a period of 5 years:
- The loan amount is \[tex]$10,000. - At a 15% interest rate, the total amount paid over the 5 years is \$[/tex]14,274.
- The profit for the bank is the total amount paid minus the initial loan amount.
- Profit = \[tex]$14,274 - \$[/tex]10,000 = \[tex]$4,274. 2. Calculate the savings for a consumer over the life of the loan with a 5% interest rate instead of a 10% interest rate: - At a 5% interest rate, the total amount paid over 5 years is \$[/tex]11,322.
- At a 10% interest rate, the total amount paid over 5 years is \[tex]$12,750. - The savings for the consumer would be the difference between the total amounts paid at the two different interest rates. - Savings = \$[/tex]12,750 - \[tex]$11,322 = \$[/tex]1,428.
Using these calculations, we can fill in the blanks:
- The bank would earn a profit of \[tex]$4,274 over 5 years if a customer was charged 15% interest. - A consumer would save \$[/tex]1,428 over the life of the loan with a 5% interest rate rather than a 10% interest rate.
1. Calculate the profit that the bank would earn if a customer was charged a 15% interest rate over a period of 5 years:
- The loan amount is \[tex]$10,000. - At a 15% interest rate, the total amount paid over the 5 years is \$[/tex]14,274.
- The profit for the bank is the total amount paid minus the initial loan amount.
- Profit = \[tex]$14,274 - \$[/tex]10,000 = \[tex]$4,274. 2. Calculate the savings for a consumer over the life of the loan with a 5% interest rate instead of a 10% interest rate: - At a 5% interest rate, the total amount paid over 5 years is \$[/tex]11,322.
- At a 10% interest rate, the total amount paid over 5 years is \[tex]$12,750. - The savings for the consumer would be the difference between the total amounts paid at the two different interest rates. - Savings = \$[/tex]12,750 - \[tex]$11,322 = \$[/tex]1,428.
Using these calculations, we can fill in the blanks:
- The bank would earn a profit of \[tex]$4,274 over 5 years if a customer was charged 15% interest. - A consumer would save \$[/tex]1,428 over the life of the loan with a 5% interest rate rather than a 10% interest rate.