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.