In the given problem, apply your knowledge in algebraic expression and basic mathematics especially in solving word problem involving interest of loan.
Given Statement
Suppose that you have a choice of two loans: one at 5% simple interest for 6 years, and one at 6% simple interest for five years.
Mathematical Equation
A = P[1+0.05(t)]
A = P[1+0.05(6)]
A = P(1.3)
A = 1.3P→ for 5%
A = P[1+0.06(t)]
A = P[1+0.06(5)]
A = P(1.3)
A = 1.3P→ for 6%
Which will result in the smaller future value?
Let the principal amount, P = 1000
A = 1.3P→ for 5%
A = 1.3(1000)
A = 1 300
A = 1.3P→ for 6%
A = 1.3(1000)
A = 1 300
Answer: They have the same future value.
Does it depend on the principal?
Yes, it will depend on the principal amount. They will have the same future value if they have the same principal amount.
Learn more about interest including simple and compound interest here at https://brainly.ph/question/11648255
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