Question

Karen wants to buy a new car but needs money for the down payment. Her parents agree to lend her money at an annual rate of 4%, charged as simpleInterest. They lend her $8000 for 6 years. She makes no payments except the one at the end of that time.Answer the following questions. If necessary, refer to the list of financial formulas.х5?(a) How much total interest will Karen have to pay?s0(b) What will the total repayment amount be (including Interest)?s[]

Answer 1

a) $1,920

b) $9,920

Step-by-step explanation:

Step 1. Gather all of the information.

The amount borrowed will be the principal or starting amount P:

`P=8,000`

The interest rate will be r:

`r=4\text{ percent}`

We will need the interest rate in decimal form, for that, divide the percentage amount by 100:

`\begin{gathered} r=(4)/(100) \\ \downarrow \\ r=0.04 \end{gathered}`

And the time of the loan is 6 years, this will be the value of t:

`t=6`

Step 2. To solve part a, we use the following formula to calculate the interest:

`I=p* r* t`

Substituting all of the known values:

`I=8,000*0.04*6`

The result is:

`I=1,920`

The total interest that Karen will have to pay is $1,920.

Step 3. To solve part b, we need to find the total repayment amount.

To find this, we add the interest and the principal amount:

`T=P+I`

Where T represents the total amount.

Substituting P and I:

`\begin{gathered} T=8,000+1,920 \\ \downarrow \\ T=9,920 \end{gathered}`

The total amount she will have to repay is $9,920.

Answer:

a) $1,920

b) $9,920