Question

8) Eugene borrows $250 at a 4% annual interest rate. If he does not

make any payments, how much simple interest will he owe in 18 months?
A) $10
B) $15
C) $18
D) $20

Answer 1

The simplest interest will be $15 ⇒ B

Explanation:

The rule of the simple interest is I = Prt, where

• P is the initial amount

• r is the rate in decimal

• t is the time

∵ Eugene borrows $250 at a 4% annual interest rate

∴ P = 250

∴ r = 4% = 4 ÷ 100 = 0.04

∵ The time is 18 months

→ Change the time to year because the rate is annual

∵ 1 year = 12 months

∴ t = 18 ÷ 12 = 1.5 years

→ Substitute the values of P, r, and t in the rule above to find the interest

∵ I = 250 × 0.04 × 1.5

∴ I = 15

∴ The simplest interest will be $15