Simple Interest Problems Solution for Set 9 Question 9
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Solution to Question 9
You're going to have to do this question in two bits. One part is to work out how much interest Lamar will have to pay over the 54 months. The second thing you're going to have to do is calculate how much money in total Lamar 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 principal is just the size of the loan - $2000. The interest rate is 4% 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 = ($2000 * 4 * 4.5) / 100
simple interest paid = $360.00
So now for the second part of the question, which is working out the total amount Lamar will have to pay back. We know that Lamar has to pay back the actual amount he borrowed (the principal), as well as the interest:
total amount = simple interest + principal
total amount = $360.00 + $2000
total amount = $2360.00.
So the total amount Lamar will have to pay back to the Columbia Bank is $2360.00.