Meredith borrows $12,560 and pays 2 percent simple interest each year for 4 years. What is the total amount of interest that she will pay on the loan?

Question

$251.20
$1,004.80
$11,555.20
$13,564.80

Answer 1

To calculate the total amount of interest that Meredith will pay on her loan, we can use the formula for simple interest:

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

where:

• \( P \) is the principal amount (the initial amount borrowed),
• \( r \) is the annual interest rate (as a decimal),
• \( t \) is the time the money is borrowed for (in years).

In this case:

• \( P = 12,560 \)
• \( r = 0.02 \) (2% expressed as a decimal)
• \( t = 4 \) years

Now, substituting the values into the formula:

\[ \text{Interest} = 12,560 \times 0.02 \times 4 \] \[ \text{Interest} = 12,560 \times 0.08 \] \[ \text{Interest} = 1,004.8 \]

Therefore, the total amount of interest that Meredith will pay on the loan is $1,004.80.