Simple Interest Problems Solution for Set 10 Question 9
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Solution to Question 9
So there are two parts to this question. One part is to work out how much interest Felix will have to pay over the 12 months. The second thing you're going to have to do is calculate how much money in total Felix 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 amount initially loaned is the principal, so that's $4000. We also need the interest rate PER YEAR, which is 1%. 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. The term length is 12 months according to the problem. Well, how many years is 12 months? We get this by dividing by twelve, to get an answer of 1.0 years. So our term length is 1.0 years:
simple interest paid = ($4000 * 1 * 1.0) / 100
simple interest paid = $40.00
Now we need to work out the total amount of money that Felix will have to pay back. We know that Felix has to pay back the actual amount he borrowed (the principal), as well as the interest:
total amount = simple interest + principal
total amount = $40.00 + $4000
total amount = $4040.00.
So the total amount Felix will have to pay back to the Wilmington Trust Co. is $4040.00.