Question

Justin loans his uncle $2,500. His uncle charged 6.5% simple interest. His uncle pays him back in 2.5 years. How much interest does his uncle pay?

a) $162.50
b) $406.25
c) $325.00
d) $81.25

Answer 1

Using the simple interest formula I = PRT, Justin's uncle pays back $406.25 in interest, which is option b).

Step-by-step explanation:

To calculate the simple interest that Justin's uncle will pay back, we use the formula I = PRT, where:

• I is the interest,
• P is the principal amount ($2,500),
• R is the rate of interest per year (6.5%), and
• T is the time the money is borrowed (2.5 years).

Using the formula:

I = $2,500 × 0.065 × 2.5

I = $406.25

Therefore, the total amount of interest Justin's uncle pays back is $406.25, which corresponds to option b).