Asked by Raquel Placito-Tovar on Jun 22, 2024
Verified
Paula Frye loaned $10,000 to her son's new business at 5% ordinary simple interest (360-day year). At the end of the loan period, Paula received the $10,000 plus $125 interest. Compute the length of the loan period. (To the nearest day.)
Ordinary Simple Interest
Interest calculated on the principal amount only, not on accrued interest over time.
360-Day Year
A simplified accounting method where each month is considered to have 30 days, resulting in a year total of 360 days, used in financial calculations.
Loan Period
The duration over which a borrower agrees to pay back a loan to the lender, typically expressed in months or years.
- Attain the skill to compute and understand ordinary simple interest on loans using a 360-day annual span.
- Ascertain the period of the loan by calculating it from the interest rate, principal value, and overall interest.
Verified Answer
CO
Cathy O'BrienJun 25, 2024
Final Answer :
T = I ÷ (PR) = $125 ÷ ($10,000 × 0.05) = 0.25 year; 0.25 × 360 = 90 days
Learning Objectives
- Attain the skill to compute and understand ordinary simple interest on loans using a 360-day annual span.
- Ascertain the period of the loan by calculating it from the interest rate, principal value, and overall interest.