Question

Sasha borrows $100 at 12% simple interest, to be paid back in 3 months. How much does she pay back

Answer 1

$103

Explanation:

Her borrowing is for 3/12 of a year, so her effective interest for the loan is ...

(3/12)(12%) = 3%

That is, her interest charge is ...

$100 × 0.03 = $3

and the amount Sasha pays back is $103.