Question

Owen has a loan for $3700 at a rate of 5% annually. If the interest is not compounded, what is the total amount of repayment if the loan is for 7 years?

A. $1295.00
B. $3700.00
C. $3884.00
D. $4995.00

Answer 1

Ok, so you would use the simple interest equation, I=PRT where you are solving for I (interest). So, you would solve using P=3700, R= .05(percent in decimal form) and T=7 years. Multiply that all together and you answer would be $1295. But, that is just the interest so in order to get the total repayment you must add that number to 3700. So the answer would be D, $4995

Answer 2

D. $4995.00

I just use my shortcuts here:

0.05 times 7 years is 0.35. The TOTAL amount, so 3700*1.35.

That is 4995

Hope this helps!!