Question

Leah borrows £10,000 over 5 years at a simple interest rate of 15%.

Calculate how much interest she will pay over the 5 years?
How much will Leah have to pay back in total

Answer 1

She will pay $7,500 interest over the 5 years

She will have to pay back $17,500 in total

Explanation:

Let us revise the rule of the simple interest

I = Prt and A = P(1 + rt) , where:

• A = Total Accrued Amount (principal + interest)

• P = Principal Amount

• I = Interest Amount

• r = Rate of Interest per year in decimal

• t = Time Period involved in months or years

∵ Leah borrows £10,000 over 5 years at a simple interest rate of 15%.

∴ P = 10,000

∴ t = 5

∴ r = 15% =
`(15)/(100)` = 0.15

→ Substitute them in the first rule to find the interest

∵ I = 10,000(0.15)(5)

∴ I = 7,500

∴ She will pay $7,500 interest over the 5 years

→ Let us find A

∵ A = 10,000(1 + 0.15×5)

∴ A = 17,500

∴ She will have to pay back $17,500 in total