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Chapter 8: Problem 31

In order to start a small business, a student takes out a simple interest loan for \(\$ 4000\) for nine months at a rate of \(8.25 \%\). a. How much interest must the student pay? b. Find the future value of the loan.

Short Answer

Expert verified
a. The student must pay \$ 247.50 as interest. b. The future value of the loan is \$ 4247.50.

Step by step solution

01

Calculate the Simple Interest

The formula for simple interest is \(I = PRT/100\). Substitute the given values into the formula: \(I = 4000*8.25*9/100 \times 12\)
02

Simplify the Expression

Now, simplify the expression. You will find the total interest that the student needs to pay.
03

Calculate the Future Value of the Loan

The future value is equal to the principal plus the interest. So, add the principal and the interest. This will tell you how much the student owes in total after nine months.

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