Final answer:
This answer explains the calculation of simple interest and provides solutions to two specific problems: finding the total interest on a $5,000 loan over three years at a 6% rate, and determining the interest rate charged for $500 interest accrued over five years on a $10,000 loan.
Step-by-step explanation:
The subject in question relates to the calculation of simple interest, a fundamental concept in financial mathematics. The two problems given require an understanding of how interest accumulates over time on loans and savings.
Question 6
Simple interest can be calculated using the formula I = PRT, where I represents interest, P is the principal amount, R is the rate of interest per period, and T is the time in years. For a $5,000 loan at 6% for three years, the interest would be I = $5,000 x 0.06 x 3, so the total amount of interest would be $900.
Question 7
To find the interest rate charged on a $10,000 loan that produced $500 in simple interest after five years, we rearrange the simple interest formula to solve for R: R = I / (P x T). Therefore, the interest rate would be R = $500 / ($10,000 x 5), resulting in an annual rate of 1%.
The complete question is: Your bank account pays interest with an EAR of 5 is: