Question

Paula Frye loaned $10,000 to her son's new business at 5% ordinary simple interest 360 day a year. At the end if the loan period, Paula received$10,000 plus $125 interest. Compute the length of the loan period to the nearest day

Answer 1

Use the formula: I = P x R x T

I = $125

R = 5%

P = $10,000

T = T/ days

I = P x R x T

125 = $10,000 X 5% X (T/365)

125 = $10,000 X 0.05 X (T/365)

125 = $500 X (T/365)

125 = $500T/365

Cross multiply

$500T = 125 x 365

$500T = 45625

$500T/$500 = 45625/$500

T = 91.5 days

T = 91 days

That is the length of the loan period to the nearest day is 91 days

Explanation:

The simple interest I , on a principal P, Invested for T years, at R interest rate is given by the formula. I = P x R x T.

All the letters are given except T which represents the time. what we need do is to plug the given numbers into the formula and find the unknown T.

it is very important to note that T is expressed in years or fraction of a year