SOLUTION: Robert gets a loan from his bank. He agrees to borrow £6 000 at a fixed annual simple interest rate of 7%. He also agrees to pay the loan back over a 10 year period. How much money

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Question 1093073: Robert gets a loan from his bank. He agrees to borrow £6 000 at a fixed annual simple interest rate of 7%. He also agrees to pay the loan back over a 10 year period. How much money in total will he have paid back at the end of 10 years.
Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
the formula for simple interest is:

i = p * r * n

f = p + i

combine the two formulas together and you get f = p + p * r * n.

factor out the p to get f = p * (1 + r * n).

i is the interest
p is the present value or principal
r is the interest rate per time period
n is the number of time periods.
f is the future value

in your problem:

p equals 6000
r = .07 per year
n = 10 years.

the formula becomes 6000 * (1 + .07 * 10) = 6000 * 1.7 = 10200.

if you calculated it separately from i = p * r * n and then f = p * i, you would get the same result.

i = p * r * n becomes i = 6000 * .07 * 10 which becomes 4200.

f = p + i becomes f = 6000 + 4200 which becomes 10200.