Question - Calculating Simple Interest
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Solution:
The question asks to determine the amount of simple interest earned for the use of a loan. To calculate the simple interest, you can use the formula:\[ \text{Simple Interest (SI)} = \text{Principal (P)} \times \text{rate (r)} \times \text{time (t)} \]In the problem:- Principal (P) = $5,400- Rate (r) = 10% per year or 0.10 when expressed as a decimal- Time (t) = 18 yearsPlugging the values into the formula, we get:\[ \text{SI} = 5400 \times 0.10 \times 18 \]\[ \text{SI} = 5400 \times 1.8 \]\[ \text{SI} = 9720 \]Therefore, the amount of simple interest earned over the 18 year period would be $9,720.
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