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23 October, 21:03

You borrowed $2,500 from your grandmother. You agreed to pay back the loan with a single payment at the end of five years. The interest rate was set up at 2% per year. How much will you owe your grandmother when you pay off the loan

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  1. 23 October, 21:09
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    Answer: $2,750

    Explanation: This is a simple interest problem, we calculate thus:

    Principal = $2,500

    Time = 5 years

    Rate = 2%

    Formula:

    I = (P x R x T) / 100

    I = (2,500 x 2 x 5) / 100

    I = 25,000/100

    I = 250.

    Therefore the amount that will be owed at the end of 5 years is:

    $2,500 + $250 = $2,750.
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