Question

Mr.Moh borrowed $4000 from the Be-lie Bank to open a new business. The bank charged him an interest of 15% per year. The loan was given for 3 years. What was the cost of the loan for Mr. Moh? How much interest did Mr.Moh pay at the end of the 3 years?

Answer 1

Answer: The cost of loan for Mr. Moh = $6083.48,

Mr.Moh paid $2083.48 interest at the end of the 3 years.

Explanation:

Cost of a loan includes original amount and the interest charged on it.

Formula to calculate accumulated amount after t years:

`A=P(1+r)^t`, where P= original amount, r=rate of interest.

Here, P= $4000 , r= 15%= 0.15, t = 3 years

`A=4000(1+0.15)^3\\\\=4000(1.15)^3\\\\=4000*1.52087\approx6083.48`

Cost of loan = $6083.48

The cost of loan for Mr. Moh = $6083.48,

Interest = A-P = $(6083.48-4000)= $ 2083.48

Hence, Mr.Moh paid $2083.48 interest at the end of the 3 years