Question

What is the simple interest on a $3,750 loan at a rate of 5% per year after 5 years?

$9,375.00

$937.50

$13,125.00

$4,697.50

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 amount of the loan),
- \( r \) is the annual interest rate (in decimal form),
- \( t \) is the time the money is borrowed for (in years).

In this case:
- \( P = 3750 \)
- \( r = 5\% = 0.05 \)
- \( t = 5 \)

Now plug the values into the formula:

\[
\text{Simple Interest} = 3750 \times 0.05 \times 5
\]

Calculating this:

\[
\text{Simple Interest} = 3750 \times 0.05 = 187.50
\]

Now multiplying by the time (5 years):

\[
\text{Simple Interest} = 187.50 \times 5 = 937.50
\]

So the simple interest on a $3,750 loan at a rate of 5% per year after 5 years is **$937.50**.