Question

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)

Answer 1

91 days

Explanation:

Amount loaned = $10,000.

Interest rate = 5%

Paula received $125 as interest .

Since, the interest rate is 5% , One has to pay the 5% of total amount loaned in a year.

in a year , he has to pay
`(5)/(100)`×10,000 = $500.

But he paid $125 as interest , So,

Length of loan period =
`(125)/(500)` Year =
`(1)/(4)`th Year

= 3 months

Thus, he paid the amount in 91 days. (Since one month will surely be of 31 days)