Which loan option would incur the lowest total simple-interest charges?

To determine which loan option incurs the lowest total simple-interest charges, it's essential to calculate the interest for each option using the simple interest formula:

[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} ]

For the second option, which is the chosen answer, the calculation would be:

• Principal: $6,000
• Rate: 8.5% (or 0.085 as a decimal)
• Time: 1 year

Using the formula, the interest would be:

[ \text{Interest} = 6,000 \times 0.085 \times 1 = 510 ]

This means the total interest charged for this loan would be $510.

Comparing this to the other loan options:

• For the first option ($7,000 at 8% for 2 years): [ \text{Interest} = 7,000 \times 0.08 \times 2 = 1,120 ]

• For the third option ($4,000 at 9% for 6 years): [ \text{Interest} = 4,000 \times 0.09