Simple Interest Problems Solution for Set 2 Question 10
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Solution to Question 10
So there are two parts to this question. One part is to work out how much interest Karter will have to pay over the 30 months. The other is to work out the total amount Karter has to pay back. Let's calculate the interest first. We get to use the simple interest formula:
simple interest paid = (principal * interest rate * term length) / 100
The amount initially loaned is the principal, so that's $3000. The interest rate is 9% 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. The term length is 30 months according to the problem. This term length must be converted into years. We get this by dividing by twelve, to get an answer of 2.5 years. So our term length is 2.5 years:
simple interest paid = ($3000 * 9 * 2.5) / 100
simple interest paid = $675.00
So now for the second part of the question, which is working out the total amount Karter 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 = $675.00 + $3000
total amount = $3675.00.
So the total amount Karter will have to pay back to the Boston Private Bank & Trust Co. is $3675.00.