Calculate the simple interest and maturity value. (Do not round intermediate calculations. Round your answers to the nearest cent.)

Question

Principal: $6,300

Interest rate: 4%

Time: 20 mo.

What's the Simple interest:

What's the Maturity value:

Answer 1

The rate of 4% is assumed to be an annual rate, so 20 months = 1 year + 8/12 year.

So, for simple interest we $6,300.00 x .04 = $252.00 for the first 12 months.

And $6,300.00 x .04 * 8/12 = $189.00 for the next 8 months.

So, simple interest for 20 months is $252.00 + $189.00 = $441.00

And Maturity value = $6,300.00 + $439.00 = $6,741.00

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