Question

If a lender makes a simple loan of ​$400 for 4 years and charges 5%, then the amount that the lender receive at maturity is ​$ ?. ​(Round your response to the nearest two decimal​ place)

If a lender makes a simple loan of $500 for one year and charges $90 ​interest, then the simple interest rate on that loan is % ?. (Round your response to the nearest whole​ number)

If a borrower must repay​ $106.50 one year from today in order to receive a simple loan of​ $100 today, the simple interest on this loan is

A. ​6.0%

B. 6.5%

C. 65%

D. 5.0%

Answer 1

Simple interest on a loan is mathematically represented as:

Simple interest = Principal * Rate * Time

a) Simple interest = $400 * 5% * 4 = $80

Total amount that lender would receive =Principal + Interest = $400 + $80 = $480

b) $90 = $500 * Rate * 1

Rate = 90/500 = 18%

c) Simple interest = Total Amount - Loan Amount = $106.50 - $100 = $6.50

6.50 = 100 * Rate% * 1

Rate% = 6.50%