With simple interest, interest is earned (charged) only on the amount lent (borrowed).

P
=
principal

the
amount lent or borrowed

i = the interest rate

n = the number of years

A
= the
future value

the
amount received or due at the end of n years

i(n)(P) = interest on lending or borrowing

A = P + P (i) (n)

A = P [1+(i)(n)] The P is factored out.

**Example 1**

$12,000 is borrowed at a rate of 9 %. How much is owed after n years?

A = 12,000 (1+.09n)

The independent variable is n, the length of the loan. The dependent variable is A, the amount which must be repaid.

**Example 2**

You borrow $3,200 and want to pay it back in a lump sum after 4 years. How much will you have to pay if you are being charged 8% simple interest?

A = 3,200 [1+.08(4)]

A = 4,224

How much will you have to pay if you are being charged 10 % simple interest?

A = 3,200 [1+.10(4)]

A = 4,480

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