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ariane borrows $400 on a 4-year loan. she is charged 5% simple interest per year . How much interest is she charged for 4 years? what is the total amount she has to pay back?
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Dec 25, 2020
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ariane borrows $400 on a 4-year loan. she is charged 5% simple interest per year . How much interest is she charged for 4 years? what is the total amount she has to pay back?
Mathematics
middle-school
Kamaal
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Answer:
Interests charged for 4 years: $80
Total amount to pay back:$480
Explanation:
To know the future value of an specific amount that is borrowed from a bank we use the following equation:
,
where FV is future value, PV present value, n the amount of periods and i the interest rate.
In this particular case, the present value of the loan is $400, n=4 (4 years), i=5%. Then the future value equals:
. Then FV= $480, which is the total amount of money she would have to return in 4 years.
The
interest paid
can be calculated as the total amount paid ($480) minus the inicial loan ($400), which means that total interests paid= FV- PV= $80.
CrisisGriega
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Dec 30, 2020
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CrisisGriega
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