Andrew has a four-year college loan for $20,000. The lender charges a simple interest rate of 5 percent. How much interest will he have to pay?
simple interest = P × r × t
I = 20,000 * 0.05 * 4
I = $4,000
To calculate the amount of interest Andrew will have to pay, we can use the formula for simple interest, which is:
Simple interest = Principal (P) x Rate (r) x Time (t)
In this case:
- Principal (P) = $20,000 (the amount of the loan)
- Rate (r) = 5% (expressed as a decimal, so r = 0.05)
- Time (t) = 4 (number of years)
Now, we can plug these values into the formula:
Simple interest = $20,000 x 0.05 x 4
Let's calculate it step by step:
Step 1: Multiply the principal amount by the interest rate:
$20,000 x 0.05 = $1,000
Step 2: Multiply the result by the time (number of years):
$1,000 x 4 = $4,000
Therefore, Andrew will have to pay $4,000 in interest over the four-year period.
To calculate the interest, we can use the formula for simple interest, which is:
simple interest = P × r × t
Where:
P = Principal amount (loan amount) = $20,000
r = Interest rate (in decimal form) = 5% = 0.05
t = Time period (in years) = 4
Let's substitute the values into the formula and calculate the interest:
simple interest = $20,000 × 0.05 × 4
simple interest = $20,000 × 0.2
simple interest = $4,000
Therefore, Andrew will have to pay $4,000 in interest.