You borrow $10,000 to buy a car. The simple interest rate is 3%. You pay the loan off after 6 years. What is the total amount you paid for the loan?
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To calculate the total amount you paid for the loan, you can use the formula:
Total Amount = Principal + (Principal * Interest Rate * Time)
Where:
Principal is the initial amount borrowed ($10,000)
Interest Rate is the interest rate per year (3% or 0.03)
Time is the duration of the loan in years (6 years)
Plugging in the values into the formula:
Total Amount = $10,000 + ($10,000 * 0.03 * 6)
Calculating:
Total Amount = $10,000 + ($10,000 * 0.18)
Total Amount = $10,000 + $1,800
Total Amount = $11,800
Therefore, the total amount you paid for the loan is $11,800.
To find the total amount you paid for the loan, you need to calculate the interest accrued over the 6-year loan period and add it to the original amount borrowed.
The formula to calculate simple interest is:
Interest = Principal * Rate * Time
In this case:
Principal (P) = $10,000
Rate (R) = 3% = 0.03 (expressed as a decimal)
Time (T) = 6 years
Plugging the values into the formula, you can find the interest accrued:
Interest = $10,000 * 0.03 * 6
= $1,800
The interest accrued over the 6-year loan period is $1,800.
To calculate the total amount you paid for the loan, add the interest to the original amount borrowed:
Total amount paid = Principal + Interest
= $10,000 + $1,800
= $11,800
Therefore, the total amount you paid for the loan is $11,800.