Simple Interest Financial mathematics

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Simple Interest Financial mathematics

IB Mathematical Studies SL, Simple Interest

How can we calculate the amount borrowed if the interest paid for this loan is \$4,500 at a rate of 7% per annum over 48 months?

Thanks
William

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Joined: Mon Jan 28, 2013 8:07 pm

Re: Simple Interest Financial mathematics

IB Maths Studies SL, Simple Interest

The simple interest is given by the following formula
$I=P \cdot r \cdot n$
Where I is the amount of interest, P is the principal, r is the simple interest rate per annum and n is the time in years.

Regarding your question about the calculation of the simple interest we have that

$4500=P \cdot 0.07 \cdot \frac{48}{12}=>P=\frac{4500}{0.28}=16,071.43$

Hope these help!
nicole

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Joined: Mon Jan 28, 2013 8:10 pm

Re: Simple Interest Financial mathematics

Thanks Nicole!
William

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Joined: Mon Jan 28, 2013 8:07 pm