HelpMePlease

Question

You Borrow 1200$ from a bank that charges 9.5% simple annual interest. After 15 months, you pay back the loan. How much interest do you pay the on the loan? What is the total amount you pay the bank?

 

Answer 1

Simple interest means that every year, you're going to have to pay back the interest based on the initial amount. The annual simple interest is 9.5%, and the initial amount is $1200. Find 9.5% of 1200 to see how much you're going to have to pay back every year.

 

(0.095)(1200) = 114

This means that every year, you're going to have to pay the bank $114 worth of interest. 15 months is 1 year and 3 months. 3 months is one-fourth, or 0.25, of a year, so 15 months is 1.25 years. Every year, you have to pay $114, so find out how much interest you have to pay after 1.25 years, by multiplying those terms.

 

(114)(1.25) = 142.5

 

The amount of interest you're going to pay on the loan is $142.50. To find the total, this means you have to pay back what you initially borrowed, plus the interest as well.

 

1200 + 142.50 = 1342.50

 

You're going to need to pay back $1342.50. That's quite a bit of money there.