Question

Your brother lends you $125 at an annual interest rate of 25%. If you want to pay no more than $62.50 in simple interest, in how many years will you need to pay off the loan? Use the formula: I = Prt.

Answer 1

To pay off the loan within $62.50 in simple interest, you will need 2 years.

Step-by-step explanation:

To calculate the time it will take to pay off the loan, we can use the formula I = Prt, where I is the interest, P is the principal amount (loan amount), r is the interest rate, and t is the time (in years).

In this case, the interest is $62.50, the principal amount is $125, and the interest rate is 25% (or 0.25).

So we have the equation 62.50 = 125 × 0.25 × t. Dividing both sides of the equation by 31.25, we get t = 2 years.

Therefore, you will need to pay off the loan in 2 years.

Answer 2

3. You purchase a car using a $20,000 loan with a 5% simple interest rate. (a) How much interest do you pay on your loan if you pay off the loan in 4 years? Show your work. (b) How much interest do you pay on your loan if you pay off the loan in 2 years? Show your work. (c) How much interest do you save by paying the loan off in 2 years instead of 4? Show your work. Answer: