Question

If Ashley borrows $1,000 from a bank for one year and pays simple interest of 12%, how much will she pay the bank in all at the end of one year?

Answer 1

she would have paid $120 in all at the end of one year.

the equation would have been 1000(0.88)=x with x being the total money she would still have to pay afterwards. the reason why 1000 is multiplied by 0.88 is because the percent of decay is 12% or 0.12 and in an exponential function when we are decaying the decay factor must be less than 1 or b=1-r (r being rate of decay). So 1000*0.88 is 880 which means she paid 120.