Question

Oliver borrowed $1,500 to purchase a riding lawn mower for his lawn care business. The bank offered him an interest rate of 12% for 6 months. Calculate the simple interest using i = prt.

Answer 1

The simple interest using the formula i = prt is $9,000.

What is simple interest?

Simple interest is calculated based on a loan's principal or the initial deposit into a savings account.

Simple interest doesn't compound, therefore a creditor will only charge interest on the principal sum, and a borrower will never be required to pay further interest on the interest that has already accrued.

Simple interest is preferable for borrowers since, without compounding, overall interest costs will be lower.

So, the simple interest will be:

We know that Oliver borrowed $1500.

The interest rate was 12%.

The time period was 6 months.

We have the formula: i = prt

Now, substitute the values and calculate as follows:

i = prt

i = 1500 × 12 × 6/12

i = 1500 × 12 × 1/2

i = 1500 × 6

i = 9,000

Therefore, the simple interest using the formula i = prt is $9,000.

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