For the loan amount, interest rate, annual payment, and loan term shown in the following table, calculate the annual interest paid each year over the term of the loan, assuming that the payments are made at the end of each year.
| amount | interest rate | annual payment | term |
| $44,000 | 9% | $13,581.42 | 4 years |
The portion of the payment that is applied to interest in year 1-4 is
Simple interest is a method of calculating the charge on a loan. Simple interest is calculated for personal loans and auto loans. It is the interest received over a certain period. The amount of interest will be the fixed percentage of the principal amount borrowed which means it will not compound. It is calculated by multiplying the principal amount with interest and the number of periods.
It is calculated using the following formula:
A = P(1+rt)
Where,
A = total amount (Principal+ Interest)
P = principal amount
I = Interest
r = rate of interest
t = time period
From the above equation the interest can be calculated using the following equation:
I = A-P
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