Question

A loan of $25,000 has an annual simple interest rate of 5.5%. The total cost of the loan is $38,750.

B. How long does it take to repay the loan?

Answer 1

Answer: 10 years

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Work Shown:

A = final value = 38750

P = amount loaned = 25000

i = interest

i = A - P = 38750 - 25000 = 13750

Now apply the simple interest formula to solve for t.

i = P*r*t

13750 = 25000*0.055*t

13750 = 1375*t

t = 13750/1375

t = 10 years to pay off the loan

Side note: r = 0.055 is the decimal form of 5.5%