Question

Mark takes a bank loan of $3,600 to start up a business at an annual interest rate of 8%. How much will he have to repay in 16 months?

O A. $3,984
O B. $5,000
O C. $4,800
OD. $5,136

Answer 1

A. $3,984

Explanation:

The amount of interest is computed from ...

I = Prt

For the given values, the interest is ...

I = $3600×0.08×(16/12) = $384

Then the total amount that needs to be repaid is ...

Principal + Interest = $3600 +384 = $3,984

_____

The time period is 16 months, so is 16/12 years.

The time periods of the interest rate and "t" in the formula must match. If the interest rate is an annual rate, then "t" is in years. If the interest rate is a monthly rate, then "t" is the number of months.