Simple Interest Problems Solution for Set 8 Question 1
Click here to return to the index page for all Simple Interest Problems
Solution to Question 1
You're going to have to do this question in two bits. Jayden is going to have to pay a certain amount of interest over the period of 54 months. This has to be worked out. The second thing you're going to have to do is calculate how much money in total Jayden will end up paying 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 $3500. The interest rate is 8% 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 54 months according to the problem. This term length must be converted into years. It's 4.5 years. So our term length is 4.5 years:
simple interest paid = ($3500 * 8 * 4.5) / 100
simple interest paid = $1260.00
So now for the second part of the question, which is working out the total amount Jayden will have to pay back. We know that Jayden has to pay back the actual amount he borrowed (the principal), as well as the interest:
total amount = simple interest + principal
total amount = $1260.00 + $3500
total amount = $4760.00.
So the total amount Jayden will have to pay back to the 1st Source Bank is $4760.00.