Problema Solution
In order to help finance the purchase of a new house, the Abdullahs have decided to apply for a short-term loan (a bridge loan) in the amount of $140,000 for a term of 1 mo. If the bank charges simple interest at the rate of 12%/year, how much will the Abdullahs owe the bank at the end of the term?
Answer provided by our tutors
A = future value (principal + interest)
P = $140,000 principal amount
r = 0.12 rate of interest per year in decimal
t = 1/12 years time period involved in years
A = P(1 + rt)
A = 140000(1 + 0.12*(1/12))
A = $141,400.00
the Abdullahs will owe $141,400.00 to the bank at the end of the term.