Simple Interest Problems Solution for Set 8 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 Ruben will have to pay over the 48 months. The second thing you're going to have to do is calculate how much money in total Ruben will end up paying back. Let's calculate the interest first. 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 $1500. We also need the interest rate PER YEAR, which is 7%. 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 48 months according to the problem. Well, how many years is 48 months? We get this by dividing by twelve, to get an answer of 4.0 years. So our term length is 4.0 years:
simple interest paid = ($1500 * 7 * 4.0) / 100
simple interest paid = $420.00
Now we need to work out the total amount of money that Ruben will have to pay back. We know that Ruben has to pay back the actual amount he borrowed (the principal), as well as the interest:
total amount = simple interest + principal
total amount = $420.00 + $1500
total amount = $1920.00.
So the total amount Ruben will have to pay back to the First National Bank of Pa is $1920.00.