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16 December, 15:47

The first national bank has agreed to lend you $30,000 today, but you must repay $42,135 in 3 years. what rate is the bank is charging you

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  1. 16 December, 19:04
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    To compute for the rate for the year, the formula that we will be using would be the r = I / Pt.

    Where:

    r = interest rate

    I = interest; to solve for the interest, we know that our principal value is $30,000 and our future value is $42,135, just deduct the $30,000 from there, and you can get the interest. $42,135 - $30,000 = $12,135

    P = principal = $30,000

    t = time = 3 years

    r = 12,135 / (30,000) (3)

    r = 12,135 / 90,000

    r = 0.1348 or 13.48%

    to check, use the I = Prt then just add the Principal to get the future value

    I = Prt

    = 30,000 * 0.1348 * 3

    = 12,135

    Future value = P + I

    = 30,000 + 12,135

    = 42, 135
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