Question

Reny establishes a loan for an $8,000 vacation package to Transylvania. The vacation company charges 5.5% simple interest. Reny plans to pay back the loan over 1.5 years.How much interest will Reny pay?

Answer 1

SOLUTION

We are asked how much interest will Reny pay after getting a loan of $8,000 at an interest rate of 5.5% for 1.5 years

We will apply the simple interest formula

$\begin{gathered} I=\frac{P\times R\times T}{100} \\ \text{Where I = interest } \\ P=\text{ principal, that is loan collected = 8,000} \\ R=\text{interest rate = 5.5\%} \\ T\text{ = time in years = 1.5 years } \end{gathered}$

Substituting the values we have

$\begin{gathered} I=\frac{P\times R\times T}{100} \\ I=\frac{8000\times5.5\times1.5}{100} \\ I=80\times5.5\times1.5 \\ I=660\text{ dollars } \end{gathered}$

Hence, the answer is $660