Question

3. Sally took a loan of 18000 Rial from S.R Finance to purchase a TV set. If the company charges Simple interest at 9% during the first 2 years, and 10% during the rest, how much will she have to pay after 5 years?

Answer 1

From the given information, following data can be extracted.

Principal P = 18,000 Rial

Simple interest rates I = 9% (for first 2 years)

Simple interest rates I = 10% (for year 3,4, and 5)

Interest for the first 2 years I = P*R*T --------------------------------(1)

Here, P = Principal Amount = 18000

R = Rate of interest = 9% = 0.09

T = Time period = 2 years

From equation (1),

I =18000*0.09*2=1,620

Principal amount after 2 years =18000+1620=19,620 Rial

The interest for next 3 years =18000*0.10*3=5,400 Rial

Total amount paid after three years=18000+5400=23,400

Total amount paid after 5 years = 19,620+23400=43,020

Please note, as the interest rate is simple interest rate, the interest is calculated based on principal amount. In the case of compound interest rate, the interest is calculated based on accumulated principal and interest amount.