To cover some unexpected expenses, you take out a simple interest loan for $4500 at a rate of 6.1% for up to one year. The lender allows you to repay the loan anytime during the year. Answer parts (a) - (c).
a) What is the annual interest rate on the loan?
Annual interest rate = 6.1%
b) How much interest would you owe if you repaid the loan at the end of 6 months?
Interest = Principal x Rate x Time
Interest = $4500 x 0.061 x 0.5 (since 6 months = 0.5 years)
Interest = $137.25
c) What is the total amount due if you repaid the loan at the end of 6 months?
Total amount due = Principal + Interest
Total amount due = $4500 + $137.25
Total amount due = $4637.25