Question

Carmen borrowed $1,200 for three months at 10.5% interest. HOWmuch interest did she pay for the loan?a. $1,231.50b. $126c. $31.50d. $1,326

Answer 1

$31.5. Option C is correct.

Explanations:

The formula for calculating the simple interest on the amount borrowed is expressed as:

`I=\text{PRT}`

where:

• P is the ,principal, (the amount borrowed)

,

• R is the ,rate ,(in decimal)

,

• T is the ,time, in years

Given the following parameters:

P = $1,200

R = 10.5% = 0.105

T = 3/12 = 1/4 year

Substitute the given parameters into the formula to have:

`\begin{gathered} I=1200*0.105*(1)/(4) \\ I=1200*0.105*0.25 \\ I=\$31.5 \end{gathered}`

Hence the interest that she pays for the loan is $31.5