Question

You borrow $2500 at a simple interest rate of 7% annually. You have to pay back the loan and interest in 90 days. How much do you pay at the end of the loan?

a) $2,662.50
b) $2,625
c) $2,700
d) $2,500

Answer 1

The total amount to be paid at the end of the loan is $2,547.95.

Step-by-step explanation:

To calculate the total amount to be paid at the end of the loan, we need to calculate the interest accrued first.
Simple interest can be calculated using the formula I = P * r * t, where I is the interest, P is the principal (loan amount), r is the interest rate, and t is the time in years.
In this case, the interest can be calculated as follows:
I = 2500 * 0.07 * (90/365) = $47.95.
The total amount to be paid at the end of the loan is the sum of the principal and the interest:
Total amount = Principal + Interest = 2500 + 47.95 = $2,547.95.