A young engineer borrowed P12,000 at an interest rate of 10 percent per annum. Find the lump sum that he will pay at the end of 4 years.
Question
A young engineer borrowed P12,000 at an interest rate of 10 percent per annum. Find the lump sum that he will pay at the end of 4 years.
Solution
To solve this problem, we need to use the formula for simple interest which is I = PRT, where:
- I is the interest
- P is the principal amount (the initial amount of money)
- R is the rate of interest per year
- T is the time the money is invested for in years
In this case, the principal P is P12,000, the rate of interest R is 10% or 0.10 (in decimal form), and the time T is 4 years.
Step 1: Calculate the interest I = PRT I = 12000 * 0.10 * 4 I = P4800
This means that the interest accrued over the 4 years is P4800.
Step 2: Calculate the total amount to be paid back The total amount to be paid back is the sum of the principal and the interest.
Total = P + I Total = 12000 + 4800 Total = P16800
So, the young engineer will pay a lump sum of P16800 at the end of 4 years.
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