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.

Expert Answers
lemjay eNotes educator| Certified Educator

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 .

malkaam | Student

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 | Student

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.