The principal P is borrowed at a simple interest rate r for a period of time t. Find the loan's future value A, or the total amount due at time t. P = $3000, r = 8%, t = 4 years (Round to the nearest cent as needed.)
The principal P is borrowed at a simple interest rate r for a period of time t. Find the loan's future value A, or the total amount due at time t. P = $3000, r = 8%, t = 4 years (Round to the nearest cent as needed.)
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
Related questions
Question
![**Calculating Future Value with Simple Interest**
The principal \( P \) is borrowed at a simple interest rate \( r \) for a period of time \( t \). Find the loan's future value \( A \), or the total amount due at time \( t \).
- \( P = \$3000 \)
- \( r = 8\% \)
- \( t = 4 \) years
\[ A = P(1 + rt) \]
**Solution:**
Calculate the interest and add it to the principal to find \( A \). Round to the nearest cent as needed.
\[ A = 3000 \times (1 + 0.08 \times 4) \]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb8a8da77-9f04-4511-b9d9-b7e746f1af1d%2F2ca87d9e-6020-4f95-b77c-2cb505ae52c7%2Faqa3rxt_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Calculating Future Value with Simple Interest**
The principal \( P \) is borrowed at a simple interest rate \( r \) for a period of time \( t \). Find the loan's future value \( A \), or the total amount due at time \( t \).
- \( P = \$3000 \)
- \( r = 8\% \)
- \( t = 4 \) years
\[ A = P(1 + rt) \]
**Solution:**
Calculate the interest and add it to the principal to find \( A \). Round to the nearest cent as needed.
\[ A = 3000 \times (1 + 0.08 \times 4) \]
Expert Solution
Introduction
Simple interest refers to an interest determination methodology that does not take the effects of compounding into account. Compound interest on the other hand takes compounding into consideration. The simple interest is calculated on the original principal amount, that is the previously earned interest is not added to the principal sum. The simple interest methodology is relatively easier and simpler to calculate interest compared to compound interest.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education