Marcy is planning to borrow $12,500 with a simple interest rate of 5.2% for 4 years. How much will she pay back to the bank?


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Duane Bryant answered
Convert percentage to decimal form by dividing 5.2 by 100 or simply moving decimal point to places to the left (.052) and 1 to that (1.052)
Multiply that by 12,500, multiply that answer by 1.052, multiply that answer by 1.052 again, and finally multiply that answer by 1.052 a fourth time ( 4 years)
Quicker way is to multiply 12,500 x 1.052^4 (interest rate raised to the power of 4 {years})
You can do the same as quicker way for your other problem but since it is 3.5 years, your answer would be: Amount of loan x 1.___ (interest rate in decimal form)^3.5
The formula is always the same only the compounding interval changes.  Simple interest is compounded yearly so you multiply number of years by 1.  If compounded monthly you have to multiply years by 12.  If you compound daily you have to multiply years by 365 and add 1 if you have a leap year.  You raise to the power of (^) the number of times the interest rate is compounded for the length of the loan.

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