Question

A company borrows $96,000 for 7 years at a simple interest rate of 14.5%. Find the interest paid on the loan.

a) $49,440
b) $20,880
c) $96,000
d) $13,920

Answer 1

To find the simple interest paid on a loan, multiply the principal amount by the interest rate (as a decimal) and by the time in years. For a loan of $96,000 at a 14.5% interest rate over 7 years, the interest paid is $137,520, which is not listed in the given options.

Step-by-step explanation:

The question asks to calculate the simple interest paid on a loan. The formula for simple interest is I = PRT, where 'I' is the interest, 'P' is the principal amount, 'R' is the rate of interest per year, and 'T' is the time in years.

Using the given values:

• Principal (P) = $96,000
• Rate (R) = 14.5% or 0.145 (as a decimal)
• Time (T) = 7 years

Now, plugging these values into the formula:

I = PRT

I = $96,000 × 0.145 × 7

I = $96,000 × 1.015

I = $137,520

So, the total interest paid on the loan after 7 years is $137,520. Based on the provided multiple-choice answers, it seems there may be a mistake as this answer is not listed as an option. However, the calculation process is correct according to standard simple interest formulas.