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#1 2006-02-01 10:19:34

Hrslvr1612
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Hey!! can ya help me please?? Thanks

5) An education loan of 8400 dollars for ten years is to be repaid in monthly installments of 122.50 dollars. What is the annual rate of this loan, computed as simple interest?

7) In ow many years would the amount to be repaid on a loan at 12.5% simple interest be double the principal of the loan?

8) At what rate of simple interest would the amount to be repaid on a loan be triple the principal of the loan after 25 years?


If you could help me that would be awesome. I don't quite understand these. Thanks a bunch!

Last edited by Hrslvr1612 (2006-02-01 10:28:55)

#2 2006-02-01 11:22:14

irspow
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Re: Hey!! can ya help me please?? Thanks

To solve these problems you need two formulas;

  1. I = Prt;   I = interest,  P = principle,  r = rate of interest,  t = time in years

   This is the formula for computing simple interest

  2.  I = A - P;   I = interest,  A = total amount,  P = principle

   This is really more intuitive.

   Combining the two yields A-P = Prt

5)  From the information given and plugging these values into the above formula;

    A - 8400 = 8400(10)r;  A = 10(12)122.50 = 14700

    (14700 - 8400) / 84000 = r = 0.075 = 7.5%

7)  Since A = 2P and I = A - P,  then I = P

    P = Prt;  rt = 1;  r = 12.5% = 0.125

   t = 1 / 0.125 = 8 years

8)  Now A = 3P which means that I = 2P

    2P = Prt and t = 25;

    2 = 25r

    r = 0.08 = 8%

#3 2006-02-01 13:33:31

Hrslvr1612
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Re: Hey!! can ya help me please?? Thanks

why or how does I=2P
for problem 8?

#4 2006-02-01 13:40:59

irspow
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Re: Hey!! can ya help me please?? Thanks

Because I = A - P and the problem states that A is 3P; (remember A = total amount)

  I = 3P - P = 2P,

  Got it?

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