Simple Interest Problems Solution for Set 1 Question 9
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Solution to Question 9
So there are two parts to this question. Finley is going to have to pay a certain amount of interest over the period of 30 months. This has to be worked out. The other is to work out the total amount Finley has to pay back. Let's calculate the interest first. For this we'll need to call on the formula for calculating simple interest:
simple interest paid = (principal * interest rate * term length) / 100
The principal is just the size of the loan - $4000. The interest rate is 9% per year. Remember that since we're dealing with an interest rate PER YEAR, we have to do everything else in terms of years. So that means writing the term length in years. The term length is 30 months according to the problem. This term length must be converted into years. It's 2.5 years. So our term length is 2.5 years:
simple interest paid = ($4000 * 9 * 2.5) / 100
simple interest paid = $900.00
Now we need to work out the total amount of money that Finley will have to pay back. We know that Finley has to pay back the actual amount he borrowed (the principal), as well as the interest:
total amount = simple interest + principal
total amount = $900.00 + $4000
total amount = $4900.00.
So the total amount Finley will have to pay back to the Valley National Bank is $4900.00.