Question

Scott Silva borrowed $5200 from his friend Joe Vetere to buy computer equipment. He repaid the loan 10 months later with simple interest at 7%.

(A) How much interest did Scott pay after 10 months?
(B) Vetere invested the total amount received in a 5-year certificate of deposit paying 6.3% compounded quarterly. How much will he have at the end of 5 years?

Answer 1

Scott paid $303.33 in interest after 10 months. Joe Vetere will have $6941.13 at the end of 5 years.

Step-by-step explanation:

To calculate the interest paid by Scott Silva after 10 months, we can use the formula:

Interest = Principal * Rate * Time

Given that the principal amount borrowed by Scott is $5200 and the interest rate is 7%, we can calculate the interest as:

Interest = $5200 * 7% * 10/12 (since 10 months is equivalent to 10/12 of a year)

Interest = $303.33

So, Scott paid $303.33 in interest after 10 months.

To calculate the amount Joe Vetere will have at the end of 5 years after investing the total amount received in a 5-year certificate of deposit at a compounded interest rate of 6.3%, we can use the formula:

Final Amount = Principal * (1 + Rate/100)^Time

Given that the principal amount received by Joe is equal to the amount Scott borrowed, $5200, the interest rate is 6.3%, and the time is 5 years, we can calculate the final amount as:

Final Amount = $5200 * (1 + 6.3/100)^5

Final Amount = $6941.13

So, Joe Vetere will have $6941.13 at the end of 5 years.