Question

Lynne needs to borrow $5250 for cosmetic surgery. She obtains a loan from her grandmother for 30 months at a simple interest rate of 7.6%. What is the loans future value?

Answer 1

Simple interes formula for future value (A):

$A=P(1+r\cdot t)$

P is the principal amount

r is the interest rate in decimals

t is the time in years

For the given situation:

1. Turn the time from months to years:

$30\text{months}\cdot\frac{1\text{year}}{12\text{months}}=2.5\text{years}$

2. Fin the final value:

$\begin{gathered} A=5250(1+0.076\cdot2.5) \\ \\ A=5250(1+0.19) \\ \\ A=5250(1.19) \\ \\ A=6247.5 \end{gathered}$

Then, the loan future value is $6247.5