Simple Interest Levada Qualls borrows 30,900 from her bank...

Simple Interest Levada Qualls borrows $\$ 30,900$ from her bank to open a florist shop. She agrees to repay the money in 18 months with simple annual interest of $5.5 \%$
(a) How much must she pay the bank in 18 months?
(b) How much of the amount in part (a) is interest?

Key Concepts

Simple Interest

Simple interest is a method of calculating the interest charge on a loan or investment by multiplying the principal amount by the interest rate and the time period over which the money is borrowed or invested, without compounding. This means the interest is computed only on the original principal, not on the accumulated interest from previous periods.

Principal

The principal is the original sum of money borrowed or invested, before any interest or returns are added. In the context of loans, it represents the initial amount that must be repaid along with any accrued interest.

Interest Rate

The interest rate is the percentage at which interest is applied to the principal over a specified period, typically on an annual basis. It represents the cost of borrowing money or the return on investment, and is a critical factor in determining the total cost or yield.

Time Conversion

Time conversion is an important concept when using simple interest because the time period over which the interest is calculated must correspond to the period for which the rate is given. For example, if the interest rate is annual but the loan period is provided in months, the time period must be converted into years for accurate calculations.

Interest Calculation

Interest calculation involves determining the total interest accrued over the duration of the loan or investment by multiplying the principal by the interest rate and the time period. The total repayment amount is then found by adding this interest to the principal, providing a complete picture of the total cost or return.

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