Question

Show all yourwork! 1) A bank borrows $1,000,000 for 1 month at a simple interest rate of 9% per annum. How much the bank will pay back at the end of 1 month? 2) John borrows $9,000 for 4 months. If the person he is borrowing from offers a discounted loan at 7.5%, how much must he repay at the end of 4 months?

Answer 1

1)

Borrowed Amount = 1,000,000

Simple interest rate = 9% p.a

Time = 1 month

Amount to be repaid in 1 month:

$= 1,000,000*(1+\frac{.09}{12}*1)$

$= 1,000,000*1.0075$

$\bg_green \large = \$1,007,500$

2.

Amount borrowed = $9,000

Time = 4 months

Discount rate = 7.5%

Amount to be repaid in 4 months:

$= 9,000*(1+\frac{0.075}{12})^4$

$= 9,000*(1.00625)^4$

$= 9,000*1.025235353$

$\bg_green \large = \$9,227.12$

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.