interest rate is 14%, on a 7000 loan. how much will be paid back in 7 years?

Question

 solve the problem. assume that simple interest is being calculated. round to the nearest cent.

Answer 1

To answer this with simple (not compounding) interest is, well, simpler.

 

The general formula for simple interest is

 

A = P*(1+ r*t)

 

which gives us the total amount to pay back (A), with the principal amount (the 1 in the parentheses represents that you have to pay back all, or 100%, of the loan before you even think about interest) and the simple interest, which is r times t, the (usually annual) rate for the interest (r), times the (usually measured in years) amount of time (t).

 

So, since the original amount was $7,000, we put in $7000 for P.

 

Since the rate is 14% per year, we would put in 0.14/yr for r.

 

Since the time is 7 years, we would put in 7 yrs. for t.

 

A = P*(1 + r*t) becomes

A = $7000*(1 + 0.14/yr * 7 yrs)

 

Because of the PEMDAS order of operations, we start with the stuff in parentheses. Inside, the order of operations says to solve the multiplication problem first, then the addition problem.

 

A=$7000*(1 + 0.14 *7)

  =$7000*(1 + 0.98)

  =$7000*(1.98)

 

Now we can solve the last multiplication problem.

 

A=$7000*(1.98)

  =$13,860.