Calculate Simple Interest, Future Value and Present Value
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Solution Summary
The attached solution contains multiple problems related to Simple Interest and Compound Interest. There are examples on how to calculate the Present Value based on Future value of loan and similar examples on how to calculate Future Value.
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To calculate Simple Interest we need to use the following formula:
Simple Interest I = Principal x Rate x Time
Interest is the total amount of interest paid.
Principal is the amount borrowed,
Rate is the percentage of principal amount charged as interest each year.
Time is the time involved.
7. Find the simple interest I of the given loan amount.
$4000 borrowed at 6% for 3 years.
Principal P = $4000
Rate r = 6% = 6/100 = 0.06
Time t = 3
To find the simple interest, we multiply 4000 x 0.06 x 3 to get that:
I = $720.00
8. Find the simple interest I of the given loan amount.
$490 borrowed at 6 3/4% for 271 days.
Principal P = $490
Rate r = 6 3/4% = 6.75% = 0.0675
Time t = 271 days ÷ 365 days/year = 0.74 years
To find the simple interest, we multiply 490 x 0.0675 x 0.74 to get that:
I = $24.48
9. Find the simple interest I of the given loan amount.
$5,669 borrowed at 11 3/4% from July 1 to December 31 of the same year.
Principal P = $5669
Rate r = 11 3/4% = 11.75% = 0.1175
Time t = 6 months ÷ 12 months/year = 0.5 years
To find the simple interest, we multiply 5669 x 0.1175 x 0.5 to get that:
I = $333.05
To calculate the Future Value we need to use the following formulas -
Future Value (FV) A = Principal(1 + Rate)^Time
A = P(1 + r)^t
Future Value, A is Total Accrued Amount (principal + interest)
Principal is the amount borrowed,
Rate is ...
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