Thinking Mathematically (6th Edition)

Published by Pearson
ISBN 10: 0321867327
ISBN 13: 978-0-32186-732-2

Chapter 8 - Personal Finance - 8.3 Simple Interest - Exercise Set 8.3: 31

Answer

(a) The student must pay interest of $\$247.50$ (b) The future value of the loan is $\$4247.50$

Work Step by Step

(a) With simple interest, this is the formula we use to calculate the amount of interest, $I$. $I = P~r~t$ $P$ is the present value $r$ is the interest rate $t$ is the number of years We can calculate the interest. $I = P~r~t$ $I = (\$4000)(0.0825)(0.75)$ $I = \$247.50$ The student must pay interest of $\$247.50$ (b) The future value of the loan is the present value plus the interest. $A = P + I$ $A = \$4000 + \$247.50$ $A = \$4247.50$ The future value of the loan is $\$4247.50$
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