Question

You arrange for a 9-month bank loan of $8000 at an annual simple interest rate of 8.5%. Find the total amount you must repay to the bank. (Round your answer to the nearest cent.)

Answer 1

The total amount that he must pay back is the sum of the interest and the principal or initial amount borrowed. To calculate the interest, we would apply the formula for calculating simple interest which is expressed as

I = PRT

where

I is the interest after t years

P is the principal or initial amount borrowed

T is the time in years

From the information given,

P = 8000

R = 8.5 = 8.5/100 = 0.085

T = 9 months. We need to convert it to years.

recall, 12 months = 1 year

thus, 9 months = 9/12 = 0.75 year

By substituting these values into the simpla interest formula, we have

I = 8000 x 0.085 x 0.75 = 510

Thus, the amount that must be repayed is

8000 + 510 = $8510