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The formula to calculate loan interest is:
Interest = Principal Amount x Interest Rate x Time
Where:
- Principal Amount is the initial amount borrowed
- Interest Rate is the annual interest rate (expressed as a decimal)
- Time is the time period for which the loan is taken (in years)
For example, if you borrow $10,000 at an annual interest rate of 5% for 2 years, the interest would be calculated as follows:
Interest = $10,000 x 0.05 x 2 = $1,000
So, the total amount to be repaid would be the principal amount plus the interest, which in this case would be $11,000.
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