Question

Ali borrowed $300 from a lender that charged simple interest at an annual rate of 6%. When Ali paid off the loan, he paid $72 in interest. How long was the loan for, in years? If necessary, refer to the list of financial formulas.

Answer 1

Using the simple interest formula, Ali had the loan for 4 years by paying $72 in interest on a $300 loan at a 6% annual rate.

Step-by-step explanation:

To determine how long Ali had the loan for, we can use the formula for simple interest: I = PRT, where I is the interest paid, P is the principal amount (initial loan), R is the annual interest rate (as a decimal), and T is the time in years. Ali paid $72 in interest on a $300 loan at a 6% annual rate (0.06 as a decimal).

Substituting the given values into the formula gives us:
72 = 300 × 0.06 × T.

To solve for T, we rearrange the equation to get:
T = 72 / (300 × 0.06).

Carrying out the division yields:
T = 72 / 18 = 4.

Therefore, Ali had the loan for 4 years.