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Joe borrowed 6650 for 8 months from a bank. The bank discounted the loan at 3.5%. How much interest did Joe pay back?

Option 1: $183.75
Option 2: $194.38
Option 3: $216.25
Option 4: $225.19

1 Answer

7 votes

Final answer:

Joe has to pay $183.75 in interest for the discounted loan of $6,650 at a 3.5% interest rate for 8 months. The simple interest formula I = PRT is used to determine the amount of interest paid.

Step-by-step explanation:

The student is asking a question related to simple interest calculation on a discounted loan. In this scenario, Joe borrowed $6,650 from a bank, and the bank discounted the loan at a 3.5% interest rate for 8 months. To calculate the discount interest Joe has to pay, we use the formula for simple interest, which is:

I = PRT, where

  • I = Interest
  • P = Principal (the initial amount borrowed)
  • R = Rate of interest per year
  • T = Time in years

In Joe's case:

  • P = $6,650
  • R = 3.5% or 0.035 (as a decimal)
  • T = 8/12 year (because interest is charged for 8 months)

Therefore, interest I = $6,650 * 0.035 * (8/12).

By calculating this, we get:

I = $183.75

Thus, the correct answer is Option 1: $183.75, which is the amount of interest Joe has to pay back to the bank.

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