Connie loaned Sam \(\$2,500\) at a yearly interest rate of 7%. After one year how much will Sam owe Connie?



The yearly interest charged on this loan is the annual interest rate (7%) multiplied by the amount borrowed \((\$2,500)\). To get the interest charged first convert the interest rate from a percentage to a decimal by dividing by 100 (7/100) to get 0.07 then multiply 0.07 by \(\$2,500\) to get \( \$175\)
But, the question doesn't ask how much annual interest was charged it asks how much is owed at the end of the year. So, the answer is the loan amount of \(\$2,500 + \$175 \) interest charged which is \(\$2,675\).

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