Question

Adam is purchasing a new television that costs $2,187.96 after tax. He borrowed the money from his parents and must pay back the full amount plus simple interest at the rate of 3.5%. What is the interest he will pay if he takes 2 years to pay his parents back? (Include Decimal with the cents; No Commas)

Answer 1

Using simple interest, considering the parameters stated in the exercise, it is found that he will pay an interest of $153.16.

Simple Interest

Simple interest is used when there is a single compounding per time period.

The amount of interest after t years in is modeled by:

I = Prt

In which:

• P is the initial amount.

• r is the interest rate, as a decimal.

In this problem, the parameters are given as follows:

P = 2187.96, r = 0.035, t = 2.

Hence, the interest paid will be of:

I = Prt = 2187.96 x 0.035 x 2 = $153.16.

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