Question

I=Prt. You borrow $10,000 from the bank at a 8% rate for 5 years. Find

the simple interest you will pay on this loan.

Answer 1

Answer:14 000

Explanation:

Simple interest formula: A=P(1+in)

A= amount after interest is added

P= initial amount (10000)

i= interest rate (8%)

n= number of periods (5 years)

Now substitute what you have into the simple interest formula:

A=P(1+in)

A=10000(1+(8/100)(5))

A= 14 000

The reason why 8 is divided by 100 is that 8 is a percentage. Unless you have a percentage function on your calculator, I'd strongly encourage you to ALWAYS divide your percentages by 100.

Answer 2

Interest= 10000 x (0.08 x 5) = 4000