Question

If you borrow $28 000 to buy a car and repay it over 5 years with a fixed interest rate of 9.8% p.a., how much simple interest will you pay?

Answer 1

$13,720.00

Explanation:

Calculate simple interest using the equation A = P(1 + rt)

• Convert 9.8% to a decimal for ease (0.098)
• Solve: A = 28000(1 + (0.098 × 5)) = $41720.00

A = $41,720.00

Interest = total repayment - original cost

$41,720.00 - 28,000 = $13,720.00