Did you know?
Did you know that when borrowing money, the interest rate plays a crucial role in determining the total cost? For example, if you borrow $2000.00 at a 9.5% interest rate to purchase a new car and hold the loan for 3 months, the cost can be calculated by using the simple interest formula:
Interest = Principal × Rate × Time
In this case, the principal is $2000.00, the rate is 9.5% (0.095 as a decimal), and the time is 3 months (0.25 as a fraction of a year). Plugging these values into the formula, we get:
Interest = $2000.00 × 0.095 × 0.25
Thus, the interest for the three-month loan period would be $47.50. Consequently, it would cost you an additional $47.50 to borrow this money over the course of three months.
