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Charles needs a $10,000 loan in order to buy a car. Which loan option would allow him to pay the LEAST in interest? A) A 2-year loan with a 4.75% interest rate compounded annually. B) A 3-year loan with a 4.00% interest rate compounded annually. C) A 4-year loan with a 3.75% interest rate compounded annually. D) A 5-year loan with a 3.00% interest rate compounded annually.

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formula used : [tex]\sf A = P(1 + \dfrac{r}{n})^{nt}[/tex]

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✔A) A 2-year loan with a 4.75% interest rate compounded annually.

[tex]\hookrightarrow \sf A = 10,000 (1 + \dfrac{4.75\%}{1})^{(1)(2)}[/tex]

[tex]\hookrightarrow \sf A = \$10,972.56[/tex]

  • interest : $10,972.56 - $10,000 = $972.56

B) A 3-year loan with a 4.00% interest rate compounded annually.

[tex]\hookrightarrow \sf A = 10,000 (1 + \dfrac{4.00\%}{1})^{(1)(3)}[/tex]

[tex]\hookrightarrow \sf A = \$11248.64[/tex]

  • interest : $11,248.64 - $10,000 = $1248.64

C) A 4-year loan with a 3.75% interest rate compounded annually.

[tex]\hookrightarrow \sf A = 10,000 (1 + \dfrac{3.75\%}{1})^{(1)(4)}[/tex]

[tex]\hookrightarrow \sf A = \$11586.50415[/tex]

  • interest : $11,586.50415 - $10,000 = $1586.5

D) A 5-year loan with a 3.00% interest rate compounded annually.

[tex]\hookrightarrow \sf A = 10,000 (1 + \dfrac{3.00\%}{1})^{(1)(5)}[/tex]

[tex]\hookrightarrow \sf A = \$ 11592.74074[/tex]

  • interest :  $11,592.74074 - $10,000 = $1592.74

Thus loan of 2-year loan with a 4.75% interest which is compounded annually will allow him to pay the least interest of only $972.56.

The least interest is 972.56 dollars. Then he has to select a 2-year loan with a 4.75% interest rate compounded annually.

What is compound interest?

Compound interest is the interest on a loan or deposit calculated based on the initial principal and the accumulated interest from the previous period.

We know that the formula for the amount will be

[tex]A = P (1 + r) ^t[/tex]

A = Amount

P = Loan amount

r = rate of interest

t = time

The interest is given as

Interest = A - P

Charles needs a $10,000 loan in order to buy a car.

A) A 2-year loan with a 4.75% interest rate compounded annually. Then the amount will be

[tex]\rm A = 10000(1.0475)^2\\\\A = 10972.56[/tex]

Then the interest will be

Interest = 10972.56 - 10000

Interest = 972.56

The amount of interest is $972.56.

B) A 3-year loan with a 4.00% interest rate compounded annually.  Then the amount will be

[tex]\rm A = 10000(1.04)^3\\\\A = 11248.64[/tex]

Then the interest will be

Interest = 11248.64 - 10000

Interest = 1248.64

The amount of interest is $1248.64.

C) A 4-year loan with a 3.75% interest rate compounded annually.  Then the amount will be

[tex]\rm A = 10000(1.0375)^4\\\\A = 11586.50[/tex]

Then the interest will be

Interest = 11586.50 - 10000

Interest = 1586.50

The amount of interest is $1586.50.

D) A 5-year loan with a 3.00% interest rate compounded annually. Then the amount will be

[tex]\rm A = 10000(1.03)^5\\\\A = 11592.74[/tex]

Then the interest will be

Interest = 11592.74 - 10000

Interest = 1592.74

The amount of interest is $1592.74.

More about the compound interest link is given below.

https://brainly.com/question/25857212

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