Chapter 5_part2_student

Solution i prt p180000t3 wecanfindibyusing 81000

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: year) Example: Fill in the blanks a. b. c. d. Interest (I) ………… $225 $112 $150 Principal (P) $1,000 ………… $800 $500 Rate (R) 12% 9% ………… 6% Time (t) 2 yr 1 yr 2 yr ………… Example: Suppose you see a car with a price of 350,000 BHT …Future Value… The future amount is the amount you will have after the interest is added to the principal, or present value. Let A = Future Value. that is advertised at 7,291.67 BHT per month for 5 years. What is the amount of interest paid? A = P + I Example: If business borrows 180,000 BHT and repays 261,000 BHT in 3 years, what is the simple interest rate? Solution I = Prt P = 180,000; t = 3; we can find I by using 81,000 = 180,000(r)(3) I = A – P = 261,000 – 180,000 81 81,000 = 540,000r = 81,000 81,000 =r 540,000 0.15 = r The rate is 15%. …Ordinary Interest… There are two ways to convert a number of days to a portion of a year Exact interest: 365 days per year Ordinary interest: 360 days per year Most applications and businesses use ordinary interest. t = Actual Number of Days 360 Example: Suppose that you borrow $1,200 on March 25 at 21% simple interest. How much interest accrues to September 15 (174 days later)? What is the total amount that must be repaid? Solution We are given P = 1,200, r = 0.21, and t = 174/360. I = Prt = 1,200(0.21)( 174 ) 360 = 121.8 The amount of interest is $121.80. To find the amount that must be repaid, find the future value: A = P + I = 1,200 + 121.80 = 1,321.80 The amount that must be repaid is $1,321.80. Future Future Value = Present Value + Interest A = P + I = P + Prt = P(1 + rt) Example: If $10,000 is deposited in an account earning 5¾% simple interest, what is the future value in 5 years? Solution Distributive property …Future Value Formula… (Simple Interest) A = P(1 + rt) 8.3 Buying on Credit Two types of consumer credit allow you to make installment purchase. Closed‐end is the traditional installment loan. An installment loan is an agreement to pay off a load or a purchase by making equal pay...
View Full Document

Ask a homework question - tutors are online