A person borrows $5000 at a rate of 8% per annum for 3 years. What is the total

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Question: A person borrows $5000 at a rate of 8% per annum for 3 years. What is the total interest paid?

Options:

Correct Answer: $1800

Solution:

Simple Interest = Principal * Rate * Time = 5000 * 0.08 * 3 = $1200.

A person borrows $5000 at a rate of 8% per annum for 3 years. What is the total interest paid?

A person borrows $5000 at a rate of 8% per annum for 3 years. What is the total interest paid?

Step 1: Identify the principal amount borrowed. In this case, it is $5000.
Step 2: Identify the annual interest rate. Here, it is 8%, which can be written as 0.08 in decimal form.
Step 3: Identify the time period for which the money is borrowed. This is 3 years.
Step 4: Use the formula for simple interest: Simple Interest = Principal * Rate * Time.
Step 5: Plug in the values into the formula: Simple Interest = 5000 * 0.08 * 3.
Step 6: Calculate the interest: 5000 * 0.08 = 400, then 400 * 3 = 1200.
Step 7: The total interest paid after 3 years is $1200.

Simple Interest – The calculation of interest based on the original principal amount, without compounding.