(A) Your sister has loaned you $1,000 with the understanding that you will repay the principal plus 4% simple interest when you can. How much would you owe her if you repaid the loan after 1 year? After 2 years? After 5 years? After 10 years?

(B) How is the interest after 10 years related to the interest after 1 year? After 2 years? After 5 years?

(C) Explain why your answers are consistent with the fact that for simple interest, the graph of future value as a function of time is a straight line (Fig. 1).

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Figure 1 Future value ($) A 1,600 1,400 1,200 1,000+ 800 600 400 200 A = 1,000(1+0.04t)- 0 1 2 3 4 5 6 7 8 9 10 Time (years) 1