Question

A person borrowed $12,000.00 for starting a bakery shop at 11.5% per year at simple interest. What is the amount of money that they have to pay at the end of 3 years to clear the debt?

Answer 1

To clear a $12,000 debt at an 11.5% annual simple interest rate after 3 years, the total repayment would be $16,140, which includes $4,140 in interest.

Step-by-step explanation:

To calculate the total amount that must be repaid on a loan at a given simple interest rate, you can use the formula:

Simple Interest (I) = Principal (P) × Interest Rate (r) × Time (t)

For a $12,000 loan at an 11.5% annual interest rate over 3 years, the simple interest would be:

Simple Interest = $12,000 × 11.5% × 3

Simple Interest = $12,000 × 0.115 × 3

Simple Interest = $4,140

To find the total amount to be repaid, Add the simple interest to the principal:

Total Repayment = Principal + Simple Interest

Total Repayment = $12,000 + $4,140

Total Repayment = $16,140

Hence, at the end of 3 years, the person would have to pay $16,140 to clear the debt.