A loan of $5000 is taken for 4 years at a simple interest rate of 8% per annum.

₹0.0

Question: A loan of $5000 is taken for 4 years at a simple interest rate of 8% per annum. What is the total interest paid?

Options:

Correct Answer: $1600

Solution:

Simple Interest = 5000 × 8 × 4 / 100 = $1600.

A loan of $5000 is taken for 4 years at a simple interest rate of 8% per annum. What is the total interest paid?

A loan of $5000 is taken for 4 years at a simple interest rate of 8% per annum. What is the total interest paid?

Step 1: Identify the principal amount (the initial loan). In this case, it is $5000.
Step 2: Identify the interest rate. Here, it is 8% per annum.
Step 3: Identify the time period for the loan. It is 4 years.
Step 4: Use the simple interest formula: Simple Interest = Principal × Rate × Time / 100.
Step 5: Plug in the values: Simple Interest = 5000 × 8 × 4 / 100.
Step 6: Calculate the multiplication: 5000 × 8 = 40000.
Step 7: Multiply the result by 4: 40000 × 4 = 160000.
Step 8: Divide by 100 to find the interest: 160000 / 100 = 1600.
Step 9: The total interest paid over 4 years is $1600.

Simple Interest – The calculation of interest on a loan based on the original principal amount, the interest rate, and the time period.