calculate the maturity value of a simple interest, 2 - month loan of $7,000 if the annual interest rate is…
calculate the maturity value of a simple interest, 2 - month loan of $7,000 if the annual interest rate is 7.2%.
Answer
Explanation:
Step1: Convert time to years
The loan is for 2 - months. Since there are 12 months in a year, $t=\frac{2}{12}=\frac{1}{6}$ years.
Step2: Identify principal and rate
The principal amount $P = 7000$ and the annual interest rate $r=7.2%=0.072$.
Step3: Calculate simple - interest
The formula for simple interest is $I = Prt$. Substitute the values: $I=7000\times0.072\times\frac{1}{6}$. $I = 7000\times0.012=84$.
Step4: Calculate maturity value
The maturity value $A$ of a simple - interest loan is given by $A=P + I$. So $A=7000 + 84=7084$.
Answer:
$7084$