Question

Ricardo borrows $1,850 for 10 months at an interest rate of 12.25%. What amount will

Answer 1

9514 1404 393

Answer:

  $2038.85

Step-by-step explanation:

The value of the loan at that point is given by ...

  A = P(1 +rt) . . . . . Principal P, rate r, time t (years)

  A = $1850(1 + 0.1225·(10/12)) = $2038.85

Ricardo will have paid back $2038.85 at the end of the loan period.

_____

Additional comment

We assume that the loan accrues simple interest and that the amount due is the sum of principal and interest at the end of the loan period.

The question is not specific as to whether interest compounds, or whether intermediate (monthly) payments are made. There are many possible ways the loan could be repaid, generally involving different amounts for the different terms.