Chapter 5_part2_student

# Solution i prt p180000t3 wecanfindibyusing 81000

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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...
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