Question

A restaurant borrows from a local bank for months. The local bank charges simple interest at an annual rate of for this loan. Assume each month is of a year. Answer each part below.Do not round any intermediate computations, and round your final answers to the nearest cent. If necessary, refer to the list of financial formulas.

(a) Find the interest that will be owed after 4 months
(b) Assuming the restaurant doesn't make any payments, find the amount owed after 4 months

Answer 1

Complete Question:

A restaurant borrows $16,100 from a local bank for 4 months. The local bank charges simple interest at an annual rate of 2.45% for this loan. Assume each month is 1/12 of a year.

Answer each part below.Do not round any intermediate computations, and round your final answers to the nearest cent. If necessary, refer to the list of financial formulas.

(a) Find the interest that will be owed after 4 months

(b) Assuming the restaurant doesn't make any payments, find the amount owed after 4 months

Answer:

a) Interest that will be owed after 4 months , I = $131.48

b) Amount owed by the restaurant after 4 months = $16231.48

Explanation:

Note that the question instructs not to round any intermediate computations except the final answer.

Annual rate = 2.45%

Monthly rate,
`R = (2.45\%)/(12)`

R = 0.20416666666%

Time, T = 4 months

Interest,
`I = (PRT)/(100)`

`I = (16100 * 0.20416666666 * 4)/(100) \\I = 161 * 0.20416666666 * 4\\I = \$131.483333333\\I = \$131.48`

b) If the restaurant doesn't make any payments, that means after four months, they will be owing both the capital and the interest ( i.e the amount)

Amount owed by the restaurant after 4 months = (Amount borrowed + Interest)

Amount owed by the restaurant after 4 months = 16100 + 131.48

Amount owed by the restaurant after 4 months = $16231.48