Amber borrows $1,450 from the bank. if she repays the loan in 3 years, the annual interest rate is 5%, compounded annually. however, if she can repay the loan in 2 years, the annual rate is 3.5%, compounded annually. how much interest will amber save by repaying the loan in 2 years? (to the nearest dollar)

Given that Amber borrows $1,450 from the bank.

She has two options to pay the loan amount. Pay in 3 years or in 2 years.

Calculation of interest for payment in 3 years.

Loan amount P=1450

Interest rate r=5%=0.05

Time t=3 years

Interest is compounded annually so we will use compound interest formula

Plug the given value

A=1678.55625

Interest = A-P=1678.55625-1450= 228.55625

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Calculation of interest for payment in 2 years.

Loan amount P=1450

Interest rate r=3.5%=0.035

Time t=2 years

Interest is compounded annually so we will use compound interest formula

Plug the given value

A=1553.27625

Interest = A-P=1553.27625-1450= 103.27625

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Now we just have to find the difference of interest in both cases

228.55625-103.27625 = 125.28

Hence final answer is approx $125.

the answer is b

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