Question

Krisi took out a $500 discounted loan calculated using a simple interest rate of 5% for a period of 2 years. How much money does Krisi receive when the loan is drawn down?

Answer 1

$550

Explanation:

Use the formula for total amount with simple interest

`A = P(1+rt)`

A is final value. P is starting value.

r is interest rate in decimal form. t is time.

5% = 0.05

A = P(1+rt)

A = 500(1+0.05(2))

A = 550

Krisi receives $550 when the loan is drawn down.