The total amount of cash inflows a lender would receive on a $600 two-year loan with a simple annual interest rate of 8 percent is equal to
A) $48.
B) $96.
C) $648.
D) $696.

Question

Quizplus · Accepted Answer

The formula for simple interest is I = P x r x t, where I is the interest, P is the principal, r is the annual interest rate, and t is the time in years.

In this case, we have: 
P = $600 
r = 0.08 (since the interest rate is given as 8 percent) 
t = 2

So, the interest earned over the two-year loan period is: 
I = $600 x 0.08 x 2 
I = $96

Therefore, the total amount of cash inflows (i.e. principal + interest) that the lender would receive is: 
$600 + $96 = $696

Therefore, the answer is D, $696.

The Total Amount of Cash Inflows a Lender Would Receive