document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1164287>Question 1164287</A>: <I><SPAN STYLE=\"word-break: break-all;\"> Hi<BR>\n" );
document.write( "Frank borrows 8000 dollars  for 3 years simple interest at 10% pa. One year into the loan he needs to borrow a further 2500 dollars at 12.5% pa. How much does he owe altogether on these loans after 3 years given no repayments were made.\r<BR>\n" );
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document.write( "My answer was 14,125 dollars the textbook says 13,525 dollars.\r<BR>\n" );
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document.write( "Thanks </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #788597 by </B><A HREF=/tutors/aboutme.mpl?userid=Theo><B>Theo(13342)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=Theo><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=Theo><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=788597\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> the formula for simple interest is:<BR>\n" );
document.write( "f = p * (1 + r * n)<BR>\n" );
document.write( "f is the future value <BR>\n" );
document.write( "p is the present value<BR>\n" );
document.write( "r is the interest rate per time period<BR>\n" );
document.write( "n is the number of time periods.\r<BR>\n" );
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document.write( "you have two loans.<BR>\n" );
document.write( "the first loan is for 8000 at 10% interest per year for 3 years.<BR>\n" );
document.write( "the second loan is for 2500 at 12.5% interest per year for 2 years, starting in the second year of the first loan.\r<BR>\n" );
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document.write( "these are two separate loans.<BR>\n" );
document.write( "they should not be combined until the end.\r<BR>\n" );
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document.write( "the first loan gets you f = 8000 * (1 + .10 * 3) = 10400 due at the end of the third year.<BR>\n" );
document.write( "the second loan gets you f = 2500 * (1 + .125 * 2) = 3125 due at the end of the second year which coincides with the end of the third year for the firsts loan.<BR>\n" );
document.write( "add them together and your total debt is 13525 at the end of the third year of the first loan.\r<BR>\n" );
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document.write( "what you did was the following, as far as i can tell.<BR>\n" );
document.write( "8000 * 1.1 = 8800<BR>\n" );
document.write( "then you added 2500 to that to get 11300<BR>\n" );
document.write( "then you did the following:<BR>\n" );
document.write( "11300 * (1 + .125 * 2) = 14235.\r<BR>\n" );
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document.write( "you combined the loans together after the first year and then charged both of them 12.5% interest for the next two years.<BR>\n" );
document.write( "your first loan was charged 10% for the first year and then 12.5% for the next two year.<BR>\n" );
document.write( "this is not consistent with the requirements of the first loan.<BR>\n" );
document.write( "the first loan needed to be at 10% for all 3 years.<BR>\n" );
document.write( "the second loan was a separate loan at 12.5% running concurrently with the first loan at 10% per year for the remaining two years of the first loan.<BR>\n" );
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