Question

What is the total that he needs to pay his friend back ?

Answer 1

Step-by-step explanation:

Given:

Principal amount =$7,000

Interest rate in one year = 5% or 0.05

To find the total amount that he needs to pay back, we use simple interest formula:

`\begin{gathered} A=P(1+rt) \\ \text{where:} \\ A=\text{ Final Amount} \\ P=\text{ Principal Amount} \\ r=\text{Annual interest rate} \\ t=\text{time in years} \end{gathered}`

We also convert 4 months into a year:

We plug in what we know:

`\begin{gathered} A=P(1+rt) \\ =7,000(1+(0.05)((1)/(3))) \\ \text{Calculate} \\ A=7,116.67 \end{gathered}`

Therefore, the amount that he needs to pay his friend back is $7,116.67.