Assuming you were charged simple interest of 5% on a loan of $1,000 that requires you to repay in two payments, one at the end of the first six months and one at the end of the second six months, total payments on the loan would be
A) $1,037.50.
B) $525.00.
C) $512.50.
D) $1,000.00.

Question

Quizplus · Accepted Answer

Simple interest is calculated as $I = P \times r \times t$, where $P$ is the principal amount ($1,000), $r$ is the annual interest rate (5% or 0.05), and $t$ is the time in years. For a 6-month period, $t$ is 0.5 years. The interest for each 6-month period is $1000 \times 0.05 \times 0.5 = $25$. Over two 6-month periods, the total interest is $2 \times $25 = $50$. Therefore, the total repayment is the principal plus the total interest, which is $1000 + 50 = $1050$. However, none of the options exactly match this calculation, suggesting a possible mistake in my explanation or a misunderstanding of the question's conditions. Given the options, A) $1,037.50 is the closest to a reasonable calculation, assuming some misinterpretation in the interest calculation or payment structure.

Assuming You Were Charged Simple Interest of 5% on a Loan