Question
Jaime’s refrigerator loan statement said that he would pay as interest after 4 years at an interest rate of . The
interest was calculated based on simple interest. How much did Jaime borrow to buy the refrigerator?

To find out how much Jaime borrowed, we can use the simple interest formula:

where is the interest, is the principal amount (the money borrowed), is the rate (expressed as a decimal), and is the time in years.

Jaime’s interest is , the rate is (since ), and the time is years. Plugging in those values:

Now, calculate :

To find , divide both sides by :

So, Jaime borrowed approximately to buy the refrigerator.

Now, let’s dive into some neat insights!

The use of simple interest dates back centuries, and it was first used by the Babylonians, who had an incredibly sophisticated system of mathematics for their time. They calculated interest on loans by applying a certain percentage over a set period, which is essentially what Jaime is experiencing today. Think of it like money’s ancient recipe for baking a financial pie!

When it comes to buying large items on credit, like refrigerators, it can be really tempting to just look at that monthly payment. One common mistake is overlooking the total interest you’ll pay over the life of the loan. Always calculate the total cost, and feel free to negotiate interest rates or look for better loan options. Keeping your financial goals in check can help you avoid the “too-good-to-be-true” traps!