Answer:
Explanation:
Given:
Principal amount =$7,000
Interest rate in one year = 5% or 0.05
To find the total amount that he needs to pay back, we use simple interest formula:
[tex]\begin{gathered} A=P(1+rt) \\ \text{where:} \\ A=\text{ Final Amount} \\ P=\text{ Principal Amount} \\ r=\text{Annual interest rate} \\ t=\text{time in years} \end{gathered}[/tex]
We also convert 4 months into a year:
We plug in what we know:
[tex]\begin{gathered} A=P(1+rt) \\ =7,000(1+(0.05)(\frac{1}{3})) \\ \text{Calculate} \\ A=7,116.67 \end{gathered}[/tex]
Therefore, the amount that he needs to pay his friend back is $7,116.67.
