Wire Company borrowed $100,000 for 3 years with a stated annual rate of 7%. Assuming interest is computed as simple interest, Wire computed their interest expense to be $7,000 per year in interest, for a total of $21,000 at the end of the loan term. 'Click the icon to view Wire's simple interest computation.) Now assume Wire Company borrowed $100,000 for 3 years at a 7% interest rate with interest compounded annually. Wire will repay the entire amount (principal plus interest) at the end of the 3-year period. Thus, it is not paying any interest until the end of the 3 years. How much interest will it pay? Compare this amount of interest to the amount computed using the simple interest computation.  How much interest will it pay?

Answer rating: 100% (QA)

To calculate the amount of interest Wire Company will pay when borrowing 100000 for 3 years at a 7 i... View the full answer