Johnny borrowed 2000 per year from his friend for three cons

Johnny borrowed $2,000 per year from his friend for three consecutive years. Johnny’s friend agreed to charge a simple interest rate of 5% per year. The friends agreed that Johnny would pay back the loan with a single payment exactly one year after receiving the final $2,000 loan (assume each $2,000 loan is spaced one year apart). The total amount Johnny owed his friend is closest to . . .

a) $6,000

b) $6,214

c) $6,282

d) $6,419

e) $6,553

f) $6,600 (answer)

g) $6,620

Solution

Amount Owed at the end: Total Amount of borrowing (2000*3) 6000 Interest accrued: $ 2000 *5%*3 years 300 $ 2000*5% *2years 200 $ 2000*5%*1 year 100 600 Total amount owed to the friend 6600 Answer is f. $ 6600