Question

Ariane borrows $500 on a 2-year loan. She is charged 5% simple interest per year. How much interest is she charged for 2 years? What is the total amount she has to pay back? After 2 years, Ariana is charged?

Option 1: $50 interest, $550 total
Option 2: $25 interest, $525 total
Option 3: $100 interest, $600 total
Option 4: $75 interest, $575 total

Answer 1

Using the simple interest formula, Ariane is charged $50 in interest and the total amount she has to pay back is $550 after 2 years, thus Option 1: '$50 interest, $550 total' is the correct answer.

Step-by-step explanation:

The question involves calculating simple interest for a loan. To find the interest charged on a loan, we can use the simple interest formula: Interest (I) = Principal (P) × Rate (R) × Time (T). In Ariane's case, the principal is $500, the rate is 5% per year, and the time is 2 years.

First, convert the interest rate from a percentage to a decimal by dividing by 100: R = 5% ÷ 100 = 0.05.

Next, apply the simple interest formula: I = $500 × 0.05 × 2.

Now, multiply to find the total interest: I = $50 of interest over 2 years.

To determine the total amount to be paid back, add the principal to the interest: Total = Principal + Interest = $500 + $50 = $550. Therefore, Option 1 is correct: Ariane is charged $50 in interest and the total she has to pay back is $550.