Simple Interest Problems Solution for Set 5 Question 1
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Solution to Question 1
You're going to have to do this question in two bits. Rocco is going to have to pay a certain amount of interest over the period of 12 months. This has to be worked out. The other is to work out the total amount Rocco has to pay back. So the first thing to do is determine what the amount of simple interest payable is. 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 $1000. The interest rate is 1% 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 12 months according to the problem. This term length must be converted into years. It's 1.0 years. So our term length is 1.0 years:
simple interest paid = ($1000 * 1 * 1.0) / 100
simple interest paid = $10.00
So now for the second part of the question, which is working out the total amount Rocco will have to pay back. We know that Rocco has to pay back the actual amount he borrowed (the principal), as well as the interest:
total amount = simple interest + principal
total amount = $10.00 + $1000
total amount = $1010.00.
In total, Rocco will end up paying back $1010.00 to the Kearny Federal Savings Bank.