Question

Riley let his friend borrow $12,750. He wants to be paid back in 4 years and is going to charge his friend a 5.5% interest rate.

a. How much money in interest will Riley earn?

A. $2,805.62
B. $3,532.50
C. $701.25
D. $1402.50

Answer 1

Riley will earn $2,805 in interest by lending $12,750 at a 5.5% interest rate over 4 years, according to the simple interest formula I = PRT.

Step-by-step explanation:

The amount of money in interest that Riley will earn from lending $12,750 at a 5.5% interest rate over 4 years can be calculated using the simple interest formula. The formula for simple interest is I = PRT, where I is the interest, P is the principal amount, R is the rate of interest, and T is the time in years. Applying this formula, we get:

I = $12,750 × 0.055 × 4

I = $2,805

Therefore, the interest Riley will earn is $2,805, which corresponds to option A, $2,805.62. Although there's a slight discrepancy due to rounding, option A is the closest to the correct answer.