Question

Find the simple interest owed if $840 is borrowed at 5.5% for 7 years

Answer 1

The interest owed I if a amount A is borrowed at a interest rate r for t years is given by the formula:

`\begin{gathered} I=A\cdot(1+r)^t-A \\ I=A\lbrack(1+r)^t-1\rbrack \end{gathered}`

For A = $840, r = 0.055 and t = 7, we have:

`\begin{gathered} I=840\cdot(1+0.055)^7-840 \\ I=\text{ \$381.93} \end{gathered}`