Question

A business just took out a loan for $100,000 at 10% interest. If the business pays the loan off in three months, how much did the business pay in interest?

Answer 1

$2,500

Explanation:

The amount the business pay in interest can be calculated using the sinple interest formula as shown:

Simple Interest = Principal × Rate × Time/100

Given Principal = $100,000 (Loan)

Rate = 10%

Time (in years) = 3months = 3/12 years

Substituting the parameters into the formula we will have;

SI = 100,000×10×3/12×100

SI = 1000×30/12

SI = 30,000/12

SI = $2,500

Therefore the business pays an interest of $2,500