Final answer:
To calculate the total interest on a loan, the formula Interest = Principal × rate × time is used. For a $5,000 loan at 6% over three years, the interest would be $900. To find an interest rate given the interest received, principal, and time, the formula can be rearranged, leading to an example rate of 1%.
Step-by-step explanation:
The question involves finding the total interest paid on a loan when given the principal amount, interest rate, and time. To solve this problem, we use the formula: Interest = Principal × rate × time.
For example, to find the total amount of interest from a $5,000 loan after three years with a simple interest rate of 6%, the calculation would be:
Interest = $5,000 × 0.06 × 3 = $900.
In another scenario, if you receive $500 in simple interest on a loan that you made for $10,000 for five years, to find the interest rate you charged, you would rearrange the formula:
$500 = $10,000 × rate × 5 years
$500/$50,000 = rate
The interest rate is 1%.