Question

You take out a simple interest loan for $ 922 to pay for tuition. If the annual interest rate is 6 % and the loan must be repaid in 6 months, find the amount that you, the borrower, will have to repay. Round your answer to the nearest cent.

Answer 1

The total amount to be repaid is equal to $949.66

Explanation:

Simple interest is a type of interest which is usually applied on short term loans, where when a payment is made towards this kind of interest the payment first goes towards monthly interest and then the remainder is reverted towards the principal.

FORMULA FOR CALCULATING SIMPLE INTEREST =

`(PRINCIPAL * RATE OF INTEREST * TIME PERIOD)/(100)`

Here principal = $922

interest rate = 6%

time period = 6 months (when made per annum it will be 6/12)

`(\$ 922 * 6 * 1)/(100* 2)`

SIMPLE INTEREST IS EQUAL TO $27.66

The total amount that is to be repaid is equal to

PRINCIPAL + SIMPLE INTEREST

= $922 + $27.66

= $949.66