Carmen borrowed $1,200 for three months at 10.5% interest. How
much interest did she pay for the loan?
a. $1,231.50
b. $126
c. $31.50
d. $1,326
The formula to calculate simple interest is:
Interest = Principal x Rate x Time
In this case, the principal is $1,200, the rate is 10.5% and the time is 3 months.
Interest = $1,200 x 0.105 x 3
Interest = $378
Therefore, Carmen paid $378 in interest for the loan.
The answer is not given in the options, but it is closest to option C ($31.50). However, that option is only 1/12 of the correct answer, which shows the importance of carefully reading and understanding the question and answer choices.