To cover some unexpected expenses, you take out a simple interest loan for $4500 at a rate of 6.3% 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 total amount of interest paid if you repay the loan after 6 months?
To calculate the interest, we can use the formula: Interest = Principal x Rate x Time
Principal = $4500
Rate = 6.3% or 0.063
Time = 6 months or 0.5 years
Interest = $4500 x 0.063 x 0.5 = $142.50
So, the total amount of interest paid if you repay the loan after 6 months is $142.50.
(b) What is the total amount repaid if you repay the loan after 6 months?
Total Amount Repaid = Principal + Interest
Total Amount Repaid = $4500 + $142.50 = $4642.50
So, the total amount repaid if you repay the loan after 6 months is $4642.50.
(c) What is the total amount repaid if you repay the loan after 10 months?
To calculate this, we need to first calculate the interest for 10 months:
Principal = $4500
Rate = 6.3% or 0.063
Time = 10 months or 10/12 = 0.8333 years
Interest = $4500 x 0.063 x 0.8333 = $281.25
Total Amount Repaid = Principal + Interest
Total Amount Repaid = $4500 + $281.25 = $4781.25
So, the total amount repaid if you repay the loan after 10 months is $4781.25.