The 20% rate the bank borrowed Oliver the loan for 3 months gives an interest of $125.
<h3>How can the simple interest be calculated?</h3>
The amount Oliver borrowed = $2,500
The interest rate applied to the loan = 20%
Required: To calculate the simple interest using the formula, I = P•R•T
Where;
I = The simple interest
P = The principal borrowed = $2,500
T = The time or loan duration = 3 months = 1/4 year
R = The rate at which the loan is applied = 20% = 0.2
Therefore;
I = $2,500 × 0.2/year × 3/12 year = $125
The correct option for the interest paid on the loan is therefore;
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