Question

You take out a $1200 loan for 2 years at a rate of 7% per year. In total, how much will you pay back?
• $1269
O $1284
• $1368
О $1373
• None of these.

Answer 1

To calculate the total amount to be paid back on a loan, you can use the formula for calculating the total amount with simple interest:

\[
\text{Total Amount} = \text{Principal} + \text{Interest}
\]

Where:
- Principal is the initial amount borrowed (loan amount).
- Interest is calculated as:

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

Given:
- Principal = $1200
- Rate = 7% per year = 0.07 (as a decimal)
- Time = 2 years

Now, calculating the interest:

\[
\text{Interest} = 1200 \times 0.07 \times 2
\]
\[
\text{Interest} = 1200 \times 0.14
\]
\[
\text{Interest} = 168
\]

Now, add the interest to the principal to find the total amount to be paid back:

\[
\text{Total Amount} = 1200 + 168 = 1368
\]

So, the total amount that you will pay back is **$1368**.

The correct answer is **$1368**.