Question

# -You have offered your friend a \$15,000 loan with 7% simple interest per year for 8...

-You have offered your friend a \$15,000 loan with 7% simple interest per year for 8 years. How much interest will you earn on the loan?

-You are earning interest on money in your bank account at a rate of 4% compounded annually. If you deposit \$7,000 in the account for 7 years, how much ineterst will you earn?

-You need \$21000 to purchase a really sweet Honda Civic. You negotiate a loan with the bank of Mom and Pop for the \$21000 and agree that it will be repaid in 4 years. You agree on an interest rate of 11% per year compounded annually. How much would you owe after 4 years?

1)

Loan amount offered= \$ 15,000

simple interest rate = 7% p.a

time= 8 years

Interest= (loan amount * interest rate * Time)/100

Interst= (15000 * 7 * 8)/100 = (150 * 7 *8) = (1200 *7) = \$8400

2)

interest rate = 4% p.a (r)

deposit amount= principal= \$7000 (P)

time period =7 years (t)

compounded amount: A= P(1+r)t

A = 7000(1+0.04)7

A= \$ 9211.522

Interst amount = \$ ( 9211.522 - 7000)

= \$2211.522

3)

loan amount taken = \$21,000

should repaid after 4 years

Compounded rate = 11%

Amount paid after 4 years = \$ 21,000(1+0.11)4

= \$ 21000(1.518)

= \$ 31,879.4786

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