John wants to open a showroom and borrows $48,000 on 12% interest rate. He plans to pay this after 4 years. What will that total principal + interest payment be?
Question
John wants to open a showroom and borrows $48,000 on 12% interest rate. He plans to pay this after 4 years. What will that total principal + interest payment be?
Solution
To calculate the total payment (principal + interest), we first need to calculate the interest.
The formula for calculating simple interest is: I = PRT, where:
- I is the interest
- P is the principal amount (the initial amount of money)
- R is the annual interest rate (in decimal form)
- T is the time the money is invested for (in years)
In this case:
- P = $48,000
- R = 12% = 0.12 (to convert from percentage to decimal, divide by 100)
- T = 4 years
So, the interest I = PRT = 23,040.
The total payment will be the sum of the principal and the interest, which is 23,040 (interest) = $71,040.
So, John will have to pay a total of $71,040 after 4 years.
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