Question

What is the total amount of interest from a 5,000 loan after three years with a simple interest rate of 6% ?

Short answer

The total amount of interest is obtained as 900.

Step-by-step solution

Concept introduction

Simple interest is a quick way to calculate how much interest debt will expense you. The daily interest rate is multiplied by the principal multiplied by the number of days between payments to calculate simple interest.

Calculation for total amount of interest from a loan

The formula for simple interest is given as:

A=P(1+r t)

Where, A=Total Accrued Amount

P= Principal Amount

r= Rate of interest

t= Time period

A=$5,000\{1+0.06(3)$

A=$5,000+900$

A= 5,900

The interest amount would be:

Interest Amount $=5,900-5,000$

Interest Amount = 900