SOLUTION: Jane took out a 5,000 loan to buy a car. How much simple interest will she pay if she charged 10% annually and repays the loan at the end of 2 years?

Question 547824: Jane took out a 5,000 loan to buy a car. How much simple interest will she pay if she charged 10% annually and repays the loan at the end of 2 years?
Answer by mathie123(224) (Show Source): You can put this solution on YOUR website!
We know that the simple interest formula is I=Prt where I is the interest, P is the principal amount, r is the interest rate and t is the number of time periods
In our case, the principal is 5000, the interest rate is 10%=0.1, and there are 2 years (and since the interest is ANNUALLY, this is two time periods). We just need to sub this into the above formula and solve for I

So she ended up paying $1000 in interest.

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