Question

A restaurant borrows $13,900 from a local bank for 5 months. The local bank charges simple interest at an annual rate of 7.3% for this loan. Assume each month is 112 of a year. Answer each part below.

(a) Find the interest that will be owed after 5 months.
(b) Assuming the restaurant doesn't make any payments, find the amount owed after 5 months.

Answer 1

a) $422.79

b) $14,322.79

Explanation:

a) Interest = Principle × Rate as a decimal × Time in years

I = 13,900 × 0.073 × 5/12 (5 months is 5/12 of a year)

I ≈ 422.79

b) total Amount owed = Principle + Interest = 13,900 + 422.79

= 14,322.79