Question

In order ti start a small business, a student takes out a simple interest loan for $4000 for 9 months at a rate of 8.25%. How much interest must the student pay?

Answer 1

A student taking out a $4,000 simple interest loan at an 8.25% annual rate for 9 months will owe $247.50 as the total interest.

Step-by-step explanation:

To calculate the amount of simple interest that must be paid on a loan, you can use the simple interest formula: I = PRT, where I is the interest, P is the principal amount (the initial amount of the loan), R is the annual interest rate (as a decimal), and T is the time in years. For the student's loan of $4,000 with an interest rate of 8.25% for 9 months, first convert 8.25% to a decimal by dividing by 100, which is 0.0825, and then convert the time to years by dividing 9 months by 12 months/year, which is 0.75 years.

Now calculate the interest: I = PRT = $4,000 * 0.0825 * 0.75 = $247.50. Therefore, the student must pay $247.50 in interest on the loan.