Question

How much interest will be paid in 1 year for a loan of $2800 at 5 1/2% simple interest?

Answer 1

Hi there

The formula of the simple interest is
I=prt
I interest earned?
P principle 2800
R interest rate 5+(1÷2)=5.5%=0.055
T time 1 year
So
I=2,800×0.055×1
I=154...answer

Additional information
The difference between simple interest and compound interest is

Simple interest
Each year the interest is applied only on the the amount of principle
For example the amount of the principle is 2800 at 5.5%
The interest in the first year is
I=2800×0.055×1=154
And the balance is
2800+154=2954
The interest in the second year is
I=2800×0.055×1=154
And so on

While the compound interest is applied on the principle+interest of the previous year
A=2800 (1+0.055)
A=2954
THE interest is 2954-2800=154
The amount in the second year is
A=2954 (1+0.055)
A=3,116.47
(Notice that the principle in the second year is 2954 not 2800 like simple interest that's why call it compound interest)

Hope it helps
Good luck!

Answer 2

Hey there!

To find how much interest you will pay on a loan, you can use the following equation:


`A = P(1+ (r)/(n))^(nt)`, where:

A = final amount of money
P = Principal (initial amount of money)
r = interest rate (as a decimal, divide a percentage by 100 to get its decimal form)
n = number of times a year
t = years
In this case, this is all of the information that you know:

A = what we want to find
P = $2800
r = 0.055
n = 1 time
t = 1 year

All you need to do is plug in these values and solve for A.


`A = P(1+ (r)/(n))^(nt)`


`A = 2800(1+ (0.055)/(1))^(1*1)`


`A = 2800(1.055)^(1)`


`A = 2800(1.055)`


`A = 2954`

The final amount that will be paid (interest and principal) is $2954. However, the questions asks for interest alone, so just subtract the principal from the total amount of money we just found.

2954 – 2800 = $154

$154 will be paid in interest.

Hope this helped you out! :-)