Question

Dr drake is thinking about retirement and decides to sail around the world once he retires. He buys a sailboat for 125000. He borrows the money at an APR of 7.5% for five years. How much will his total interest be

Answer 1

$46875.

Explanation:

We have been given that Dr. Drake buys a sailboat for 125000. He borrows the money at an APR of 7.5% for five years.

We will find total interest after 5 years by using simple interest formula.

`A=P(1+rT)`, where,

A= Amount after T years.

P= Principal amount.

r= The annual interest rate (in decimal form).

T= Time in years.

First of all we will convert our given interest rate from percent to decimal form.

`7.5\text{ Percent}=(7.5)/(100) =0.075`

Now let us substitute our given values in above formula.

`A=125,000(1+(0.075*5))`

`A=125,000(1+0.375)`

`A=125,000(1.375)`

`A=171875`

To find the amount of total interest we will subtract principal amount from 171875.

`\text{Total amount of interest}=171875-125000`

`\text{Total amount of interest}=46875`

Therefore, the total interest after 5 years will be $46875.