Why did Janet pay the bank more than $13,000 over the next five years?

Question

Janet went to her local bank to take out a $10,000 loan to buy a car. Why did Janet pay the bank more than $13,000 over the next five years?

 

 

Group of answer choices

The bank overcharged her.

The value of the car increased.

She had to pay interest on the loan.

She overpaid the loan to collect interest.

Answer 1

The extra $3,000 is considered interest on the loan. If banks or other financial institutions didn't charge interest on loans, they wouldn't make any money to operate.