Question

A company borrows $74,000 for 2 years at a simple interest rate of 13.5%. Find the interest paid on the loan and the total amount paid.

Answer 1

• $19,980 in interest
• $93,980 total repaid

Explanation:

The amount of interest is computed using the formula ...

I = Prt

where P is the principal borrowed ($74,000), r is the annual interest rate (0.135), and t is the number of years (2). Filling in the numbers and doing the arithmetic, we have ...

I = $74,000×0.135×2 = $19,980 . . . interest on the loan

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The amount repaid is the sum of the original amount borrowed and the interest:

$74,000 +19,980 = $93,980 . . . . total amount repaid