Question

A restaurant borrowes $14900 from a local bank for 7 months. The local bank charges simple interest at an annual rate of 10% for this loan. Assume each month is 1/12 of a year

Answer 1

a.) $869.17

b.) $15769.17

a.) To find the interest, we will use the following formula:

`I=Prt`

Where:

P = Money borrowed

r = annual rate of interest

t = time

From the problem, we know that:

P = $14,900

r = 10% = 0.1

t = 7 months × 1/12

Substitute these to the formula and we will get:

`\begin{gathered} I=Prt \\ I=(\$14900)(0.1)(7*(1)/(12)) \\ I=\$869.17 \end{gathered}`

b) Assuming the restaurant never made any payments, we just need to add the interest earned and the initial amount that they borrowed:

`\$14900+\$869.17=\$15769.17`