The interest charged for 3 years would be $75 ($500 x 0.05 x 3). The total amount Ariane has to pay back would be $575 ($500 + $75).
What does a simple interest mean?
Simple interest is calculated based on the principal of a loan or the initial deposit into a savings account. Simple interest doesn't compound, therefore a creditor will only charge interest on the principal sum, and a borrower will never be required to pay interest on interest that has already accrued.
How is a simple interest calculated?
To calculate simple interest, multiply the principal sum by the time period, interest rate, and time period. Simple interest is calculated as follows: "Simple Interest = Principal x Interest Rate x Time." This equation provides the simplest method for calculating interest.
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