Simple Interest Problems Solution for Set 10 Question 10
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Solution to Question 10
You're going to have to do this question in two bits. Aden is going to have to pay a certain amount of interest over the period of 24 months. This has to be worked out. The second thing you're going to have to do is calculate how much money in total Aden will end up paying back. So the first thing to do is determine what the amount of simple interest payable is. 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 - $1500. The interest rate is 7% per year. The important thing to remember here is that since the interest rate is per per year, we must use the same unit of time (years) when we write down the term length. In the question, it says the term length is 24 months. Well, how many years is 24 months? We get this by dividing by twelve, to get an answer of 2.0 years. So our term length is 2.0 years:
simple interest paid = ($1500 * 7 * 2.0) / 100
simple interest paid = $210.00
So now for the second part of the question, which is working out the total amount Aden will have to pay back. This is going to be the initial amount he borrowed (the principal) plus the interest:
total amount = simple interest + principal
total amount = $210.00 + $1500
total amount = $1710.00.
In total, Aden will end up paying back $1710.00 to the Nara Bank.