Question

Joe Smith borrowed $46,000 to pay for a startup business. Joe must repay the loan at the end of 8 months in one payment with a 5.2 percent simple interest rate. What is the total amount that Joe must repay at that time

Answer 1

The correct answer is $47,596.2.

Step-by-step explanation:

According to the scenario, the given data are as follows:

Total amount (P)= $46,000

Rate of interest = 5.2%

Time period = 8 months

So, rate of interest for 8 months (r) = 5.2% × 8 ÷ 12 = 3.47%

Time period (t)= 1

So, we can calculate the Joe loan repayment value by using following formula:

Loan repayment value = P × ( 1 + r)^t

= $46,000 × ( 1 + 3.47%)^1

= $46,000 × ( 1.0347)^1

= $47,596.2