Question

Chelsea loans $500 to her cousin at 4% simple interest per year. Thecousin pays her back in six months. What is the total amount the cousinowes Chelsea?

Answer 1

The formula for calculating a simple interest is;

`\begin{gathered} I=P* R* T \\ P=500,R=0.04,T=0.5 \\ \text{Please note that the money was repayed after 6 months} \\ \text{Therefore, T which is time shall be half (6 months is half of 1 year)} \\ I=500*0.04*0.5 \\ I=10 \end{gathered}`

The total amount the cousin owes Chelsea is $510

She would repay the principal plus the interest calculated, and that is $500 plus $10, which equals $510