**GED Skill: Simple Interest**

**Pamela is taking out a car loan for $12,500 at 6.75% interest for 7 years. How much interest will she pay and how much will her monthly payments be ?**

Answer: To find out how much interest Pamela will pay, use the simple interest formula of principal x interest x time: $12,000 x .0675 x 7 = $5670.

**WOW that's a lot!**

To find out how much her monthly payments will be, add the principal and interest ($12,000 + $5670 = $17,670) and divide it by the total months (12 months x 7 years = 84). Finally, divide $17,670 and 84. The monthly payment will be $210.36.