The principal P is borrowed and the loan's future value A at time t is given. Determine the loan's simple interest rate r. P = $3800.00, A = $3885.50, t = 3 months
The principal P is borrowed and the loan's future value A at time t is given. Determine the loan's simple interest rate r. P = $3800.00, A = $3885.50, t = 3 months
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![The principal \( P \) is borrowed and the loan’s future value \( A \) at time \( t \) is given. Determine the loan’s simple interest rate \( r \).
\( P = \$3800.00, \, A = \$3885.50, \, t = 3 \text{ months} \)
\[ \_\_\_\_\_ \]
\( \% \) (Round to the nearest tenth of a percent as needed.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb8a8da77-9f04-4511-b9d9-b7e746f1af1d%2Fe70ebbfb-1692-4b4f-ac42-269b59dcb839%2F7di203_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The principal \( P \) is borrowed and the loan’s future value \( A \) at time \( t \) is given. Determine the loan’s simple interest rate \( r \).
\( P = \$3800.00, \, A = \$3885.50, \, t = 3 \text{ months} \)
\[ \_\_\_\_\_ \]
\( \% \) (Round to the nearest tenth of a percent as needed.)
Expert Solution
Introduction
Simple interest rate refers to the interest-determining methodology that only calculates interest on the original principal sum. The effects of compounding are not taken into account for a multi-period interest determination. The interest amount for every subsequent period is added to the original principal to determine the final amount. Simple interest does not take the effects of compounding into account which makes the interest determination easier and simple. Non-consideration of compounding eliminates any interest estimations.
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