Question

Tim is borrowing $3500 and will pay it back at the end of 4 years. The lender asks that Tim pay simple interest of 3.5% annually. Using the simple interest formula, determine how much interest Tim will have to pay back in addition to the $3500 principal amount.

Answer 1

Answer: the amount of interest that he would pay is $490

Explanation:

The formula for determining simple interest is expressed as

I = PRT/100

Where

I represents interest paid on the loan or amount borrowed.

P represents the principal or amount taken as loan or borrowed.

R represents interest rate on the loan.

T represents the duration of the loan in years.

From the information given,

P = $3500

R = 3.5%

T = 4 years

Therefore,

I = (3500 × 3.5 × 4)/100

I = $490