Question

Lorena borrowed $1950 to buy books and a tablet for her freshman year of college. She will pay off the loan in 10 months at an annual simple interest rate of 5.75%. How much interest will she be charged and what is the total amount she must pay at the end of the 10 months? Round your answer to the nearest cent.

Answer 1

Explanation:

Simple Interest = Principal * Rate * Time/100

Given

Principal (amount borrowed) = $1950

Rate = 5.75%

Time = 10month

Convert time to year

To do that, we will divide the value in months by 12 i.e Time = 10/12

Time = 5/6 years

Substitute into the formula and find the simple interest

SI = (1950 * 5.75*5/6)/100

SI = (1950 * 5.75*5)/600

SI = 56,062.5/600

SI = $93.4375

Hence she will be charged interest of $93.4375

To get the total amount after 10 months, we will use the formula;

Amount = Principal + Interest

Amount = $1950 + $93.4375

Amount = 2,043.4375

Hence she must pay back $2,043.4375 after 10 months