Christy needs $25,000 to purchase a new car. she borrows this amount at an interest rate of 8% for 5 years. what is the amount of interest that will be paid?

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10-01-2018
Business

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Christy needs $25,000 to purchase a new car. she borrows this amount at an interest rate of 8% for 5 years. what is the amount of interest that will be paid?

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jamuuj jamuuj · Answer 1 · 2018-01-17T18:05:10+01:00

Principle is the amount borrowed or invested in or from a bank or a financial institution. In this case the principle is $ 25,000, interest rate is 8% and the interest period is 5 years.
Thus amount to be paid after a period of 5 years will be 25,000 ( 1 +0.08)∧5
= 25,000 (1.08)∧5
=25,000 × 1.4693
=$36,733.20
To calculate the interest we subtract the principle sum from the Amount to be paid.
= $36733.20- $25000=11733.20
Therefore, interest =$ 11733.20