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

Question

$150

$1,150

$1,050

$50

Answer 1

To calculate the simple interest, 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 rate of interest (as a decimal),
• $t$ is the time in years.

Given:

• $P=1000$
• $r=0.05$ (5 percent as a decimal)
• $t=3$

Now plug in the values:

$$\text{Simple Interest}=1000\times 0.05\times 3$$

Calculating this gives:

$$\text{Simple Interest}=1000\times 0.15=150$$

So the simple interest after 3 years is $150.

If you want to find the total amount to be paid back after 3 years, you would add the simple interest to the principal:

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

Thus, the answers are:

• Simple Interest: $150
• Total Amount: $1,150

The correct option for the simple interest is $150.