Question

Eugene borrows $250 at a 4% annual interest rate. If he does not make any payments, how much simple interest will he owe in 18 months?

Answer 1

$265

Explanation:

We can use the simple interest formula for this:

`A = P (1 + rt)`

P = initial balance

r = annual interest rate

t = time

First, change 4% into its decimal form:

4% ->
`(4)/(100)` -> 0.04

Next, we need to change the annual interest rate to 1.5 since 18 months is 1.5 years. Now plug in the values:

`A=250(1+(0.04)(1.5))`

`A=265`

Eugene owes $265 of interest.