Sara borrowed $5,000 from her father at a simple interest rate of 12.5% per year. Over a two - year period, she made equal monthly payments to pay back the loan plus the interest on the loan. About how much was her monthly payment

The formula for simple interest is:

A = P (1+rt)

Where P = amount borrowed

r = interest rate

t = time of loan

A = 5000 (1 + 0.125*2)

A = 6,250

The total amount she paid back was $6,250

For her monthly payment divide total paid back by 24 months (2 years = 24 months)

6250 / 24 = 260.42

Her monthly payment was $260.42

260.42

Step-by-step explanation:

I = PRT

Where p is the principal

r is the interest rate = 12.5 % =.125

t = time = 2 years

I = 5000*.125*2 = 1250

The total cost is the loan plus the interest

A = 5000+1250

= 6250

Divide by the 24 months

6250/24 = 260.42