Find the simple interest owed if $430 is borrowed at 5.9% for 9 years.

Question

Find the simple interest owed if $430 is borrowed at 5.9% for 9 years.

 

Answer 1

Khris,

 

Since your problem calls for simple interest, and not compound interest, the formula is 

 

Interest (simple) = principal*interest*time = $430*.059*9 = $228.33

 

If the problem called for compound interest, then Arturo's answer would be correct.

Answer 2

Assuming the annual interest rate is 5.9%, then at the end of a year, the amount A is 1.059 times what it was at the start of a year.  Apply this 9 years in a row and get

 

A(t) = A₀(1 + r)ⁿ 

 

A₀ = $430

 

n = 9 years

 

A(9) = ($430)(1 + 0.059)⁹ = ($430)(1.059)⁹ = $720.33

 

The interest is just the difference between A(9) and A₀.

 

A(9) - A₀ = $(720.33 - 430) = $290.33