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Difficulty: EasySimple Interest

A mechanic takes out a $3,000\$3,000 loan to purchase upgraded tools. The loan agreement includes a 4%4\% annual simple interest rate. If the loan is paid off in exactly 33 years, what is the total amount of interest paid?

Answer: 360 $

Answer

360
The simple interest formula is I=P×R×TI = P \times R \times T. By plugging in the principal ($3,000\$3,000), the decimal interest rate (0.040.04), and the time (33 years), the calculation is 3000×0.04×3=3603000 \times 0.04 \times 3 = 360. Therefore, the total interest paid is $360\$360.

Step-by-Step Solution

1
Identify the given values from the problem statement.
P=3000P = 3000, R=4%R = 4\%, T=3T = 3 years
These are the required variables for the simple interest formula.
2
Convert the percentage rate to a decimal.
R=0.04R = 0.04
Percentages must be in decimal form to perform calculations.
3
Apply the simple interest formula I=P×R×TI = P \times R \times T.
I=3000×0.04×3I = 3000 \times 0.04 \times 3
This formula calculates the total interest earned or paid over a specific time period.
4
Calculate the final product.
360360
Multiplying the principal by the rate gives the interest for one year (120120), and multiplying by 3 gives the total for three years.

Key Concept

Calculating simple interest over a multi-year period.
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Topics

Simple Interest

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