Question

What is the simple interest of a loan for $1,000 with 5 percent interest after 3 years?


$1,150


$1,050


$150


$50

Answer 1

To calculate the simple interest on a loan, you can use the formula:

\[ \text{Simple Interest} = P \times r \times t \]

where:
- \( P \) is the principal amount (the initial loan amount),
- \( r \) is the annual interest rate (as a decimal),
- \( t \) is the time in years.

Given:
- \( P = 1000 \) (the amount of the loan),
- \( r = 0.05 \) (5 percent interest as a decimal),
- \( t = 3 \) (the number of years).

Now, substituting the values into the formula:

\[ \text{Simple Interest} = 1000 \times 0.05 \times 3 \]

\[ \text{Simple Interest} = 1000 \times 0.15 \]

\[ \text{Simple Interest} = 150 \]

Now, to find the total amount to be paid back after 3 years:

\[ \text{Total Amount} = P + \text{Simple Interest} \]
\[ \text{Total Amount} = 1000 + 150 = 1150 \]

The simple interest after 3 years is **$150**. So the options are:

- $1,150 (Total Amount)
- $1,050 (Principal + Part of Interest)
- **$150 (Correct Answer)**
- $50 (Incorrect)

Therefore, the correct answer is **$150**.