Question

You borrowed $2,500 from your grandmother. You agreed to pay back the loan with a single payment at the end of five years. The interest rate was set up at 2% per year. How much will you owe your grandmother when you pay off the loan

Answer 1

Answer: $2,750

Explanation: This is a simple interest problem, we calculate thus:

Principal = $2,500

Time = 5 years

Rate = 2%

Formula:

I = (P x R x T)/100

I = (2,500 x 2 x 5)/100

I = 25,000/100

I = 250.

Therefore the amount that will be owed at the end of 5 years is:

$2,500 + $250 = $2,750.

Answer 2

Answer:

$27,500

Explanation:

We can us simple interest to solve the question because it is the tool that be used in this cases

To solve this , we have the formula of simple interest as

I = (Principal ×rate × time )÷100

We given the following as;

Principal = $2,500

Rate = 2%

Time = five (5) years

Substituting the values into the formula we have

I = ($2,500× 2× 5)÷100

I = $25,000÷100

I = $250

Now the total money that will be returned to grandmother will be addition of principal and simple interest which is

= $2,500+$250

= $27,500