Question

Aisha's parents borrow $1,250 from the bank to finance a new refrigerator. The interest rate is 10.6% per year. How much simple interest will they pay if they take 18 months to repay the loan? Round to the nearest cent.

Answer 1

Aisha's parents will pay $198.75 in simple interest on a $1,250 loan with a 10.6% annual interest rate over an 18-month period.

Step-by-step explanation:

To calculate the amount of simple interest Aisha's parents will pay on a $1,250 loan with a 10.6% annual interest rate over 18 months, we use the simple interest formula:
Interest = Principal × Rate × Time

Where:
Principal = $1,250
Rate = 10.6% per year = 0.106 (as a decimal)
Time = 18 months = 1.5 years (since 18 months ÷ 12 months/year = 1.5 years)

Now we apply the values to the formula:
Interest = $1,250 × 0.106 × 1.5
Interest = $198.75

Therefore, Aisha's parents will pay $198.75 in simple interest if they take 18 months to repay the loan, rounded to the nearest cent.