Question

Use the formula A = P(1 + rt) to calculate the maturity value of the simple interest loan. (Round your answer to two decimal places.)P = $2600, r = 8.8%, t = 5 months

Answer 1

Step 1:

Given data

$\begin{gathered} P\text{ = \ 2600} \\ r\text{ = 8.8\% = }\frac{8.8}{100}\text{ = 0.088} \\ t\text{ = 5 months = }\frac{5}{12}\text{ per annum} \end{gathered}$

Step 2:

Substitute the values in the amount formula

Amount = P + Prt = P(1 + rt)

$\begin{gathered} A\text{ = P(1 + rt)} \\ A\text{ = 2600 }\times\text{ ( 1 + 0.088}\times\frac{5}{12}) \\ A\text{ = 2600 }\times\text{ ( 1 + }\frac{0.088\times5}{12}) \\ A\text{ = 2600 }\times\text{ ( 1 + 0.037)} \\ A\text{ = 2600 }\times\text{ 1.037} \\ A\text{ = \ 2696.2} \end{gathered}$