Question

TIME REMAINING

02:55:22
The following information is known about a loan.

Time = 8 years
Interest rate = 14%
Principal = $1,010

What is the total amount of simple interest that is earned?
$113.20
$1,131.20
$11,311.20
$113,112.00

Answer 1

$1,131.20 is the amount earned

Explanation:

Key skills needed: Simple Interest Formula, Operations ( +, - , x , / )

1) To understand this problem, you need to know the simple interest formula.

A = P(1+rt)

A is the amount

P is the principal

R is the interest rate as a decimal

T is the time in years

2) The 1st thing we need to do is convert the interest rate into a decimal. We have 14%. To convert into decimal form, we divide it by a 100, or move the decimal 2 places to the left. This is 0.14 --> So r=0.14

3) Next we use the formula:

A = 1,010(1+ 0.14(8))

1. We first do 0.14(8) which is 1.12 and then add it to the 1 value, so you will get --> A = 1,010(2.12)
2. Multiply and you will get A = $2,141.20
3. To find the interest earned, you subtract this by the original amount, so $2,141.20 - $1,010 which would be $1,131.20

This means $1,131.20 is your answer.

Hope you understood and have a nice day!! :D