Question

An investment of $2,500 is made for 4 months at an annual simple interest rate of 3.75%. Determine the following values. (For the first answer blank, enter an exact number. For the second answer blank, enter a number. For the third answer blank, enter an exact number as an integer, fraction, or decimal.)

P = $
r =
t =

Find the amount of interest earned (in dollars) on this loan. (Enter a number.)
I = $

Calculate the future value (in dollars) of this loan. (Enter a number.)
$

Answer 1

Explanation:

The formula for determining simple interest is expressed as

I = PRT/100

Where

P represents the principal or amount invested.

R represents interest rate

T represents duration of the investment in years.

From the information given,

P = 2500

R = 3.75

There are 12 months in a year, so

T = 4/12 = 4/12

Therefore, the amount of interest earned on this loan is

I = (2500 × 3.75 × 4) 100 × 12

I = 37500/1200 = $31.25

The future value of this loan would be

2500 + 31.25 = 2531.25