lf a lender makes a simple loan of S300 for 5 years and charges 7%, then the amo
ID: 1133744 • Letter: L
Question
lf a lender makes a simple loan of S300 for 5 years and charges 7%, then the amount that the lender receive at maturity is S 105 nearest two decimal place) Round your response to the f a ler der makes a simple loan of S20 whole number) O for one year and charges S7 interest, then the simple interest rate on that loan is % Round youresponse to the nearest ex If a borrower must repay $106.50 one year from today in order to receive a simple loan of $100 today, the simple interest on this loan is 4gA. 5.0% SH B. 65% OD. 6.0%Explanation / Answer
PART A
Loan amount = $300
Time period = 5 years
Interest rate = 7% or 0.07
Simple interest = Loan amount * Time period * Interest rate
Simple interest = $300 * 5 * 0.07 = $105
Amount to be repaid = Loan amount + Simple interest = $300 + $105 = $405
Thus,
The amount that the lender receive at maturity is $405.
Part B
Loan amount = $2,000
Simple interest = $70
Time period = 1 year
Simple interest = Loan amount * Time period * Rate of interest
$70 = $2,000 * 1 * r
r = $70/$2,000 = 0.035 or 3.5%
Rounding to the nearest whole number
r = 4%
Thus,
The simple interest on that loan is 4%
Part 3
Loan amount = $100
Amount repaid = $106.50
Simple interest = Amount repaid - Loan amount = $106.50 - $100 = $6.50
Time period = 1 year
Rate of interest = [Simple interest/(Loan amount * Time period)] * 100
Rate of interest = [6.50/(100*1)] = 0.0065 or 6.5%
The simple interest on this loan is 6.5%
Hence, the correct answer is the option (B).
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