Question

Alexwaslateonpropertytaxpaymenttothecounty.Heowed$5,475andpaidthetax6monthslate.Thecountychargesapenaltyof10%simpleinterest.Findtheamountofthepenalty.

Answer 1

To solve this question, we need to apply the next formula for simple interest:

$FV=PV(1+in)$

Where,

FV = future value (the value after applying the simple interest).

PV = present value (in this case, $5475).

i = 10%

n = 6 months or 0.5 of a year (the tax must be paid having a year).

Then, we have:

$FV=5475\cdot(1+(0.1\cdot0.5))\Rightarrow FV=5475\cdot(1+0.05)\Rightarrow FV=5475\cdot(1.05)$

Hence, we have:

$FV=5748.75$

Then, the amount of the penalty was

5748.75 - 5475 = $273.75