A loan of $2000 is taken at a simple interest rate of 7% per annum. How much tot

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Question: A loan of $2000 is taken at a simple interest rate of 7% per annum. How much total amount will be paid back after 5 years? (2023)

Options:

Correct Answer: $2600

Exam Year: 2023

Solution:

Total amount = Principal + Interest = 2000 + (2000 * 7 * 5 / 100) = $2600.

A loan of $2000 is taken at a simple interest rate of 7% per annum. How much total amount will be paid back after 5 years? (2023)

A loan of $2000 is taken at a simple interest rate of 7% per annum. How much total amount will be paid back after 5 years? (2023)

Step 1: Identify the principal amount (the initial loan). In this case, it is $2000.
Step 2: Identify the interest rate. Here, it is 7% per annum.
Step 3: Identify the time period for the loan. In this case, it is 5 years.
Step 4: Calculate the interest using the formula: Interest = Principal * Rate * Time / 100.
Step 5: Substitute the values into the formula: Interest = 2000 * 7 * 5 / 100.
Step 6: Calculate the interest: 2000 * 7 = 14000; then 14000 * 5 = 70000; finally, 70000 / 100 = 700.
Step 7: Now, add the interest to the principal to find the total amount to be paid back: Total Amount = Principal + Interest.
Step 8: Substitute the values: Total Amount = 2000 + 700.
Step 9: Calculate the total amount: 2000 + 700 = 2700.

Simple Interest Calculation – Understanding how to calculate simple interest using the formula: Interest = Principal × Rate × Time.