Use the simple interest formula I=Prt, where I is the interest, P the principal, r the annual interest rate, and t the time in years.
$ 3660
Practice makes perfect
If we borrow money from a bank, we pay the bank interest for the use of their money. Similarly, if we open a savings account, the bank deposits extra money on this account as interest. To calculate the interest I, we use the simple interest formula.
I= P r t, where...
I& = Interest
P& = Principal
r& = Annual interest rate
t& = Time (in years)
We know that we take a loan of $2400 with an annual interest rate of 10.5 %. We want to calculate the amount we pay for the loan after 5 years. Keep in mind that 10.5 % is written in decimal form as 0.105.
P= 2400, r= 0.105, t= 5
To calculate the interest, we will substitute these values into the simple interest formula and evaluate the right-hand side.
After 5 years, the interest accrued is $1260. The total amount we pay for the loan is the sum of the loan and the accrued interest.
$ 2400+ $ 1260=$ 3660
The amount we pay after 5 years is $ 3660.
