Alex borrowed Php4,000 for 5 years at 6% simple interest rate to pay for his band equipment. How much interest is that?
Question
Alex borrowed Php4,000 for 5 years at a 6% simple interest rate. How much interest is that?
Solution
To calculate the simple interest, we use the formula:
Interest = Principal x Rate x Time
where:
- Principal is the initial amount of money that was borrowed or invested, in this case Php4,000.
- Rate is the annual interest rate, in this case 6% or 0.06 when expressed as a decimal.
- Time is the length of time the money is borrowed or invested for, in this case 5 years.
Substituting these values into the formula gives:
Interest = Php4,000 x 0.06 x 5
So, the interest that Alex would have to pay for his band equipment is Php1,200.
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