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 - Concept and Vocabulary Check: 6

Answer

The statement is false. A correct statement would be: If $\$4,000$ is borrowed at $7.6\%$ for three months, the future value of the loan is $\$4,076$.

Work Step by Step

To find the future value, use the formula $A=P(1+rt)$ where P = principal amount borrowed, r = interest rate per year, and t= length of the loan. Using the formula above, the future value will be: $A= \$4000(1 + 7.6\% \cdot \frac{3}{12}) \\A= \$4,076$ Thus, the given statement is false. The amount given in the statement is the interest, not the future value. A correct statement would be: If $\$4,000$ is borrowed at $7.6\%$ for three months, the future value of the loan is $\$4,076$.
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