Finance

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The average cost for a vacation is $1,050. If a family borrows money for the vacation at an interest rate of 11.9% for 6 months,what is the total cost of the vacation including the interest on the loan?

  • Finance -

    You want to calculate the interest on $1050 at 11.9% interest per year after 6 month(s).

    The formula we'll use for this is the simple interest formula, or:

    Where:

    * P is the principal amount, $1050.00.
    * r is the interest rate, 11.9% per year, or in decimal form, 11.9/100=0.119.
    * t is the time involved, 6....month(s) time periods.
    * Since your interest rate is "per year" and you gave your time interval in "month(s)" we need to convert your time interval into "year" as well.

    Do this by dividing your time, 6- month(s), by 12, since there's 12 months in 1 year.

    * So, t is 0.5....year time periods.

    To find the simple interest, we multiply 1050 × 0.119 × 0.5 to get that:

    The interest is: $62.48

    Usually now, the interest is added onto the principal to figure some new amount after 6 month(s),
    or 1050.00 + 62.48 = 1112.48. For example:

    * If you borrowed the $1050.00, you would now owe $1112.48

    * If you loaned someone $1050.00, you would now be due $1112.48

    * If owned something, like a $1050.00 bond, it would be worth $1112.48 now.

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