Suppose you borrow $4200 at an annual simple interest rate of 10.5% for a term of 18 months. How much simple interest will you owe? What is the total amount you will have to repay (maturity value)? i am not good at this one working on my problem
I = PRT
I = 4200 * 0.105 * 1.5
I = $661.50
661.5 + 4200 = ?
$4,861.50
Right!
To calculate the simple interest and total amount you will have to repay, you need a formula:
Simple Interest = Principal × Rate × Time
Total Repayment = Principal + Simple Interest
Let's break down the information given:
Principal (P): $4200
Annual Interest Rate (R): 10.5%
Term (Time): 18 months
First, let's calculate the simple interest using the formula:
Simple Interest = Principal × Rate × Time
Simple Interest = $4200 × 0.105 × 1.5 (since 18 months = 1.5 years)
Calculating this, the simple interest equals $661.50.
Now, to find the total amount you will have to repay, add the principal to the simple interest:
Total Repayment = Principal + Simple Interest
Total Repayment = $4200 + $661.50
Calculating this, the total amount you will have to repay is $4861.50.