A person takes a simple interest loan out for $5000 for 10 months at 3.5%. How much interest must the person pay? this is the way I calculated the problem 5000 * 0.35 *10/12 = $145.25 However, the...

A person takes a simple interest loan out for $5000 for 10 months at 3.5%. How much interest must the person pay?

this is the way I calculated the problem

5000 * 0.35 *10/12 = $145.25

However, the problem then says to find the future value of the simple interest loan.

so i tried A=(1+ (0.35)(.83))

I get the same answer $145.25

Please help me figure the future value, there is no future time frame besides the 10 months.

Asked on by micabu11

3 Answers | Add Yours

lemjay's profile pic

lemjay | High School Teacher | (Level 3) Senior Educator

Posted on

You are correct, the interest earned is:

`I=5000*0.035 *(10/12)=5000*0.035*0.83 `

`I=145.25`

To solve for the future value, add the interest to the principal amount.

`A=P + I = 5000+145.25`

`A=5145.25`

Therefore, the future value of the amount loaned is $5145.25 .

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suchita's profile pic

suchita | Student, Grade 10 | (Level 1) eNoter

Posted on

how to know that to find the future amount we have to add the interest and the principal??????

malkaam's profile pic

malkaam | Student, Undergraduate | (Level 1) Valedictorian

Posted on

A person takes a simple interest loan out for $5000 for 10 months at 3.5%. How much interest must the person pay?

= 5000 * 10/12 * 3.5/100

= 5000 * 0.83 * 0.035

= 145.25 interest

Future value (total amount to be paid back Principal amount + interest)

`=>`  5000 + 145.25 = 5145.25 Answer.

Wiggin42's profile pic

Wiggin42 | Student, Undergraduate | (Level 2) Valedictorian

Posted on

The future value of the simple loan equals the present value plus whatever value it gained or lost. That is how you know you must add the interest. 

Think of a car depreciating in value over time. If it originally cost $15,000 and depreciated by $2000 this year; its present day value is not $2000 but rather 15000 (principal) + -2000 (the loss) = $13,000. 

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