CPM Homework Help : ACC7 Problem 7-91

The Jones family wants to remodel their kitchen. They have saved $\$23,000$ in the last two years. Their contractor says the remodel will cost $\$40,000$ . They can borrow the difference at a monthly interest rate of $2\%$ simple interest. If they pay the loan off in six months, how much will they have paid?

Hint 1:

First calculate how much money the Jones need to borrow.
$\$40,000-\$23,000=\$17,000$

Hint 2:

Calculate the amount of interest that is added per month.
$\$17,000(0.02)=\$340$

More Help:

Since the Jones can pay off the loan in $6$ months, multiply the amount of interest added per month by $6$ .
$\$340(6)=\$2,040$

Answer:

Finally, add that amount to the original to find the amount of money the Jones need to pay.
$\$17,000+\$2,040=\$19,040$

Do you see how the simple interest formula was used?
$I=(17,000)(0.02)(6)$