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Simple Interest (A 2-year loan of $500 is made with 4% simple interest.…
Simple Interest
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A total of $1,200 is invested at a simple interest rate of 6% for 4 months. How much interest is earned on this investment?
Solution & Answer
Before we can apply the formula, we will need to write the time of 4 months in terms of years. Since there are 12 months in a year:
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With this adjusted to years, we can now apply the formula with P=1200 and r=0.06.
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A business takes out a simple interest loan of $10,000 at a rate of 7.5%. What is the total amount the business will repay if the loan is for 8 years?
Solution & Answer
The total amount they will repay is the future value, A. We are also given that:
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Answer: The business will pay back a total of $16,000.