Question

Arnold borrowed $7890 at 11.5 percent for five years. How much did Arnold Pay in interest?

Answer 1

Using the simple interest formula, the interest paid for the loan of $7890 at 11.5% for a term of 5 years will be:
S.I=(PRT)/100
S.I=(7890×11.5×5)/100
=$4536.75

Answer 2

Answer:

Option D. $2520 is correct

Step-by-step explanation:

Principal value = $7890

Rate of interest = 11.5 annually

$\text{Monthly Rate of Interest = }\frac{11.5}{12}=0.96\%=0.0096$

Time = 5 years

⇒ n = 60 months

$\text{Monthly Payment = }\frac{rate\times \text{Principal value}}{1-(1+r)^{-n}}\\\\\text{Monthly payment = }\frac{0.0096\times 7890}{1-(1+0.0096)^{-60}} \\\\\implies\text{Monthly Payment = }\ 173.50$

Total payment made by Arnold = No. of months × Monthly Payment

⇒ Total Payment = 60 × 173.50

⇒ Total Payment = $10410

Money borrowed = $7890

Hence, Amount of interest = Total payment - Amount borrowed

⇒ Interest = 10410 - 7890

⇒ Interest = $2520

Therefore, Option D. $2520 is correct