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: 32

Answer

(a) The school must pay interest of $\$140$ (b) The future value of the loan is $\$20,140$

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. $I = P~r~t$ $I = (\$20,000)(0.12)(\frac{7}{12})$ $I = \$140$ The school must pay interest of $\$140$ (b) The future value of the loan is the present value plus the interest. $A = P + I$ $A = \$20,000 + \$140$ $A = \$20,140$ The future value of the loan is $\$20,140$
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