Question

Bethany needs to borrow $10,000. She can borrow the money at 6% simple interest for 5 yr or she can borrow at 5% with interest compounded continuously for 5 yr.

How much total interest would Bethany pay at 6% simple interest?

Answer 1

Bethany would pay a total of $3,000 in interest over 5 years by borrowing $10,000 at a 6% simple interest rate. The calculation is based on the simple interest formula, yielding a straightforward interest total.

Step-by-step explanation:

Calculating Simple Interest for a Loan

Bethany needs to calculate the total interest she would pay if she borrowed $10,000 at a 6% simple interest rate for 5 years. The formula for simple interest is I = P × R × T, where I is the interest, P is the principal amount, R is the rate of interest per year, and T is the time in years.

To calculate the interest Bethany would pay, we use the values P = $10,000, R = 6% or 0.06 in decimal form, and T = 5 years. Plugging these values into the formula we get:

I = $10,000 × 0.06 × 5

So, Bethany's interest calculation would be:

$10,000 × 0.06 × 5 = $3,000

Hence, Bethany would pay a total of $3,000 in interest over the 5 years with the simple interest option.