George borrowed $1,895.50 for two years. The total amount he repaid
was $2,189.38. How much interest did he pay for the loan?
a. $454.50
b. $293.88
c. $227.73
d. $455
To find out how much interest George paid, we need to subtract the amount he borrowed from the total amount he repaid.
Total amount repaid - Amount borrowed = Interest paid
$2,189.38 - $1,895.50 = $293.88
Therefore, George paid $293.88 in interest for the loan. The answer is b.
This is a poor question.
Since you are dealing with interest at different times , you cannot just
add or subtract sums of money which are not at the same time spot.
e.g. $100 now is not the same as $100 two years from now.
A more interesting question would have been:
What is the annual interest rate, compounded monthly, given the
following data .....
I understand your point, and you are correct that a more complex question could have been asked to better test the understanding of interest calculation. However, for a basic understanding of interest, it is common to use simple interest, where the interest is calculated based on the principal amount and not compounded over time. In this case, the question is asking for the total amount of interest paid over two years, which can be calculated by subtracting the amount borrowed from the total amount repaid. For more complex scenarios, using compound interest and considering the time value of money is important. Thank you for your feedback!
To calculate the interest that George paid for the loan, we first need to find the principal amount, which is the amount he borrowed. We can then subtract the principal from the total amount repaid to find the interest.
To find the principal amount, we subtract the interest from the total amount repaid:
Principal = Total amount repaid - Interest
Given:
Total amount repaid = $2,189.38
Principal = $1,895.50
Now we can calculate the interest:
Interest = Total amount repaid - Principal
Interest = $2,189.38 - $1,895.50
Interest = $293.88
So, George paid $293.88 in interest for the loan.
Therefore, the correct answer is b. $293.88.