Given a two-year loan of $50,000 and an annual interest rate of 8 percent, how much interest will accrue during the life of the loan? Assume no principal payments during the term.)
A)$4,000
B)$8,000
C)$400
D)None of the above

Question

Quizplus · Accepted Answer

The total interest accrued during the life of the loan can be calculated using the simple interest formula:

I = P x r x t

Where: 
I = interest 
P = principal (amount of the loan) 
r = annual interest rate 
t = time (in years)

Plugging in the values given: 
P = $50,000 
r = 8% or 0.08 (decimal form) 
t = 2 years

I = $50,000 x 0.08 x 2 
I = $8,000

Therefore, the correct answer is B. $8,000.

Given a Two-Year Loan of $50,000 and an Annual Interest