If Jack loans Bob $1,500 at a 7% annual interest rate, how much will Bob owe after one year?

• A. $105
• B. $1,500
• C. $1,605
• D. $1,507

Answer: (C)

To determine how much Bob will owe Jack after one year, we need to calculate the interest accrued on the loan and then add this interest to the principal amount. The principal amount here is $1,500 and the annual interest rate is 7%.

First, calculate the interest using the formula:

[

\text{Interest} = \text{Principal} \times \text{Interest Rate}

]

Substituting the values:

[

\text{Interest} = 1,500 \times 0.07 = 105

]

This means that after one year, Bob will owe an additional $105 in interest. Now, to find the total amount Bob owes to Jack after one year, we need to sum the original loan amount and the interest:

[

\text{Total Amount Owed} = \text{Principal} + \text{Interest} = 1,500 + 105 = 1,605

]

Thus, after one year, Bob will owe Jack a total of $1,605, making this the correct answer to the question.