Question

to go on a summer trip, abdul borrows $700. he makes no payments until the end of 5 years, when he pays off the entire loan. the lender charges simple interest at an annual rate of 4%.
answer the following questions. if necessary, refer to the list of financial formulas.
(a) how much total interest will abdul have to pay?
$
(b) what will the total repayment amount be (including interest)?
$

Explanation:

Part (a)

Step1: Recall simple interest formula

The formula for simple interest is $I = P \times r \times t$, where $P$ is the principal amount, $r$ is the annual interest rate (in decimal), and $t$ is the time in years.

Step2: Identify values

Here, $P = 700$, $r = 4\% = 0.04$, and $t = 5$.

Step3: Calculate interest

Substitute the values into the formula: $I = 700 \times 0.04 \times 5$.
First, calculate $700 \times 0.04 = 28$. Then, $28 \times 5 = 140$.

Step1: Recall total repayment formula

The total repayment amount $A$ (including interest) is the sum of the principal $P$ and the interest $I$, so $A = P + I$.

Step2: Substitute values

We know $P = 700$ and from part (a), $I = 140$. So, $A = 700 + 140$.

Step3: Calculate total repayment

$700 + 140 = 840$.

Answer:

The total interest Abdul will have to pay is $\$140$.

Part (b)