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)

Step 1: Recall the 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 form), and $t$ is the time in years.
Here, $P = 700$, $r = 4\% = 0.04$, and $t = 5$ years.

Step 2: Substitute the values into the formula

Substitute $P = 700$, $r = 0.04$, and $t = 5$ into the formula:
$I = 700 \times 0.04 \times 5$

Step 3: Calculate the interest

First, calculate $700 \times 0.04 = 28$. Then, $28 \times 5 = 140$.

Step 1: Recall the formula for total repayment

The total repayment amount (including interest) is the principal amount plus the interest, i.e., $A = P + I$.

Step 2: Substitute the values

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

Step 3: Calculate the total repayment

$700 + 140 = 840$.

Answer:

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

Part (b)