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Question

Simple interest is the amount of money the borrower pays based on the amount borrowed (the principal) for a given period of time (months or years) It is calculated this way: $I = p r t .$ If a person borrows $20,000 ( p ) to buy a car, pays 6.95% interest ( r ), and takes 5 years ( t ) to repay the loan, how much will the borrower pay in simple interest?

Solution

VerifiedStep 1

1 of 2The money the borrower will pay in simple interest $(I = prt)$ at

p is the borrows money = 20000 $\ \ \ t is the time to repay the loan = 5 years \ \ \ r is the interest =6.95 % \ \ \ Then$ I = 20000\cdot$\dfrac{6.95}{100}$ \cdot5 = $6950$

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