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Karen wants to buy a new car but needs money for the down payment. Her parents agree to lend her money at an annual rate of 4%, charged as simpleInterest. They lend her $8000 for 6 years. She makes no payments except the one at the end of that time.Answer the following questions. If necessary, refer to the list of financial formulas.(a) How much total interest will Karen have to pay?(b) What will the total repayment amount be (including Interest)?

Answer :

SOLUTION

The formula for simple interest is

[tex]I=\frac{\text{PRT}}{100}[/tex]

From the given information

P=$8000

R=4

T=6

Substituting these values gives

[tex]I=\frac{8000\times4\times6}{100}[/tex]

Simplify the equation

[tex]\begin{gathered} I=80\times4\times6 \\ I=\text{\$}1920 \end{gathered}[/tex]

Therefore, the total Interest Karen will have to pay is $1920

The total amount Karen will pay is

[tex]\begin{gathered} A=\text{\$}8000+\text{\$}1920 \\ A=\text{\$}9920 \end{gathered}[/tex]

The total repayment will be $9920

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