jennifer borrows 20,900 from her bank to open a flower shop. she agrees to repay in 18 months with simple annual interest of 10.4%.
A) how much must she pay the bank in 18mos
B) how much of the amount in part (a) is interest
You are given the following:
Principal = money borrowed = $20,900
Time = period of time to repay = 18 months = 1.5 years
Rate = rate of interest charged = 10.4%
The amount that she must pay the bank in 1.5 years (18 months) is given by the following formula:
Amount = Principal + Simple Interest
Therefore, we first have to calculate the simple interest, which is given by the following formula:
Interest = Principal • Time • (Rate/100)
= 20,900 • 1.5 • (10.4/100)
= 20,900 • 1.5 • 0.104
= 3,260.4
Amount = Principal + Interest
= 20,900 + 3,260.4
= 24,160.4
Thus, the amount paid back to the bank in 1.5 years is $24,160.40 (A) and $3,260.40 of this amount is interest (B).