Question

Dianna borrowed $25,000 on simple interest from a bank at a rate of 3.5% per year. How much will Dianna have to pay back at the end of the year?

a) $25,875
b) $26,000
c) $25,875
d) $24,125

Answer 1

Dianna borrowed $25,000 at a 3.5% annual simple interest rate. The interest for one year is $875, calculated using I = P*r*t. Adding the interest to the principal, Dianna will have to pay back $25,875 at the end of the year.

Step-by-step explanation:

Dianna borrowed $25,000 on simple interest from a bank at a rate of 3.5% per year. To calculate the total amount she will have to pay back at the end of the year, we use the formula for simple interest which is I = P*r*t, where I is the interest, P is the principal amount, r is the rate of interest, and t is the time in years. First, we'll convert the interest rate from a percentage to a decimal by dividing by 100: 3.5% / 100 = 0.035. The period in this case is 1 year. So the calculation for I will be: I = $25,000 * 0.035 * 1, I = $875. This is the total interest she will owe at the end of the year. To find the total amount to pay back, we add the interest to the principal amount: Total Amount = Principal + Interest, Total Amount = $25,000 + $875, Total Amount = $25,875. Therefore, the correct answer is (a) $25,875.