Understanding Interest Quick Check

Question

1 of 51 of 5 Items
Question
Calculate the final loan amount of a $22,500 auto loan with a 3.2% simple interest rate over a 5-year term.(1 point)
Responses

$72,000
$72,000

$26,100
$26,100

$58,500
$58,500

$3,600

Answer 1

To calculate the final loan amount of the auto loan, you can use the formula for simple interest:

\[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} \]

Where:

• Principal = $22,500
• Rate = 3.2% = 0.032
• Time = 5 years

Now, plug in the values:

\[ \text{Interest} = 22,500 \times 0.032 \times 5 \] \[ \text{Interest} = 22,500 \times 0.16 \] \[ \text{Interest} = 3,600 \]

Now, add the interest to the principal to find the final loan amount:

\[ \text{Final Loan Amount} = \text{Principal} + \text{Interest} \] \[ \text{Final Loan Amount} = 22,500 + 3,600 \] \[ \text{Final Loan Amount} = 26,100 \]

Therefore, the final loan amount is $26,100.