Question

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


$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**.