Question

Mary wants to buy a new house but needs money for the down payment. Her parents agree to lend her money at an annual rate of 2%, charged as simple interest. They lend her $6000 for 3 years. She makes no payments except the one at the end of that time. Answer the following questions. If necessary, refer to the list of financial formulas.

(a) How much total interest will Mary have to pay?
(b) What will the total repayment amount be (including interest)? X

Answer 1

a) Simple interest paid = $360

b) Total repayment amount = $6360

Explanation:

It is given that:

Principal, P = $6000

Rate of interest, R = 2%

Time, T = 3 years

(a) Total interest paid:

Formula for Simple Interest is given as:

`S.I. = (P * R * T)/(100)`

Putting the values of P, R and T to find out Simple Interest:
`\\\Rightarrow S.I. = (6000 * 2 * 3)/(100)\\\Rightarrow S.I. = \$360`

(b) Total repayment amount:

We know that formula for total amount is given as:

Amount = Principal + Simple Interest

Amount = 6000 + 360 = $6360

So, total repayment amount = $6360

So, the answers are:

a) Simple interest paid = $360

b) Total repayment amount = $6360