May Ling borrowed $2500.00 for vehicle repairs from her parents. She agreed to pay back the loan plus 7.5% simple interest on the $2500 added on in equal monthly payments over the next 6 months.
a) How much interest will May Ling have to pay? [2 marks]
Monthly rate = ____________ ÷ _______ = ____________
I = P r t = $________ × ________ × _________ = $___________
b) What will be the total amount she will have to pay? [1 mark]
A = P + I = $__________ + $___________ = $_____________
c) What will be her monthly payment for the loan? [1 mark] $____________ ÷ _______ = $____________
To find the answers to the given questions, we need to follow the steps for simple interest calculations.
a) Calculation of interest:
First, we need to calculate the monthly interest rate.
Monthly rate = Annual interest rate ÷ Number of months
Given the annual interest rate is 7.5%, which can be written as 0.075 in decimal form.
Number of months is 6.
Monthly rate = 0.075 ÷ 6 = 0.0125
The monthly interest rate is 0.0125.
Next, we can calculate the interest amount.
I = P * r * t
Where:
I = Interest amount
P = Principal amount (the amount borrowed)
r = Interest rate per period
t = Number of periods
Given:
P = $2500 (the amount borrowed)
r = 0.0125 (monthly interest rate)
t = 6 (number of months)
I = $2500 * 0.0125 * 6 = $187.50
Hence, May Ling will have to pay $187.50 as interest.
b) Calculation of total amount:
The total amount to be paid includes the principal amount and the interest amount.
A = P + I
Where:
A = Total amount to be paid
P = Principal amount
I = Interest amount
Given:
P = $2500 (the amount borrowed)
I = $187.50 (the interest amount calculated in part a)
A = $2500 + $187.50 = $2687.50
Therefore, the total amount May Ling will have to pay is $2687.50.
c) Calculation of monthly payment:
To determine the monthly payment, we divide the total amount by the number of months.
Monthly payment = Total amount ÷ Number of months
Given:
Total amount = $2687.50 (calculated in part b)
Number of months = 6
Monthly payment = $2687.50 ÷ 6 = $447.92
Hence, May Ling's monthly payment for the loan will be $447.92.