Question

Joanie borrowed $2,500 to purchase a new lawnmower. The interest rate was 4.5%, and she has three years to repay the loan. What is the simple interest in this transaction? Use I=Prt


$429.75


$112.50


$337.50


$2612.50

Answer 1

To calculate the simple interest using the formula \( I = Prt \), we need to identify the principal (P), the interest rate (r), and the time (t):

- Principal (P) = $2500
- Interest rate (r) = 4.5% = 0.045 (as a decimal)
- Time (t) = 3 years

Now, we can substitute these values into the formula:

\[
I = Prt = 2500 \times 0.045 \times 3
\]

Calculating it step-by-step:

1. Multiply the principal by the interest rate:
\[
2500 \times 0.045 = 112.5
\]

2. Now multiply by the time:
\[
112.5 \times 3 = 337.5
\]

Thus, the simple interest \( I \) that Joanie will owe after three years is **$337.50**.

The correct answer is **$337.50**.