Question

Find the interest rate on a loan charging $1026 simple interest on a principal of $4750 after 6 years.

Find the principal of a loan at 4.2% if the simple interest after 5 years 6 months is $1386.

Find the term of a loan of $100 at 4.5% if the simple interest is $36.

How much should be invested now at 5.2% simple interest if $9828 is needed in 5 years?

Answer 1

Simple interest is mathematically represented as:

Simple Interest = Principal * Rate * Time

Using the same mathematical relation for all parts

a) $1,026 = $4,750 * Rate * 6

Rate = 0.036

Rate = 3.60%

b) $1,386 = Principal * 4.2% * 5.5

(5 year 6 months = 5.5 years)

Principal = $6,000

c) $36 = $100 * 4.5% * Time

Time = 8 years

d) Total Amount = Principal + Simple Interest

Total Amount = Principal + (Principal * Rate * Time)

Total Amount = Principal [1 + (Rate * Time)]

$9828 = Principal [1 + (5.2% * 5)]

Principal = $9828/1.26 = $7,800