A bank in Houston loans $30,000 to a business at 14.5% annual simple interest for 21 months. How much interest will the bank earn?

Can anyone help explain to me how to solve this, please?

Question

A bank in Houston loans $30,000 to a business at 14.5%  annual simple interest for 21 months. How much interest will the bank earn?

Can anyone help explain to me how to solve this, please?

anonymous · Answer

21 months = 1 and 3/4 years.

So compute interest for 1.75 years based on 14.5% a year.

anonymous · Answer

Do I use the  A = P(1 + r/n)^nt  formula?

anonymous · Answer

NO, thats for inteest compounded annually..Your problem is simple interest

anonymous · Answer

Oh

anonymous · Answer

Watch:

anonymous · Answer

For one year, interest of 14.5% of $30,000 = $4,350.00

anonymous · Answer

That is just .145 multiplied by 30,000

anonymous · Answer

so we want 1 3/4 years...so it is another 3/4 of $30,000 = $3,262.50

anonymous · Answer

Total interest paid after 21 months (1 3/4 years) is $4,350 + $3,262.50 = $7,612.50

anonymous · Answer

I hope I didnt make an error.

anonymous · Answer

no, I am correct.

anonymous · Answer

Ok I think i get it.

anonymous · Answer

Great.