Question

2. Mrs. Siebenaller bought a “bus” for $25,000 with a 7% interest rate. Mrs. S. gets a loan to pay off in 5 years. How much interest would she pay? (1 point show work, 1 point right answer = 2 points) I=PRT A. $8,750.00 B. $33,750.00 C. $87,500.00 D. $875000.00

Answer 1

Answer:

Mrs. Siebenaller will pay A. US$ 8,750.00 of interest for the loan

Step-by-step explanation:

1. Let's review the data given to us for solving the question:

Loan amount = US$ 25,000

Time to pay off the loan = 5 years

Annual interest rate = 7% annually

2. Let's find how much interest Mrs. Siebenaller will pay, using the following formula:

Interest = PV * (1 + r)  * n - PV

PV = Loan = US$ 25,000

number of periods (n) =5 (number of years)

rate (r) = 7% = 0.07

Replacing with the real values, we have:

Interest = [25,000 *  (1 + 0.07) * 5 ] - 25,000

Interest =  [ 25,000 * 1.35] - 25,000

Interest = US$ 8,750

Mrs. Siebenaller will pay US$ 8,750.00 of interest for the loan

Answer 2

Answer: the correct option is A

Step-by-step explanation:

Cost of the bus is $25000. She took a loan of $25000 to be paid of in 5 years at an interest rate of 7%.

The formula for simple interest is expressed as

I = PRT/100

Where

I = interest

P = principal or initial amount borrowed

T = time in years

R = interest rate in percentage

From the information given,

P = 25000

R = 7%

T = 5 years

Therefore

I = (25000 × 7 × 5)/100 = 875000/100

I = $8750