Question

You decided it is important to pay off some of your debt to help build your credit score. if you paid $1,315 interest on $40,000 at 5%, what was the time, using exact interest?

Answer 1

Using the simple interest formula, it took 0.6575 years, or approximately 7.89 months, to pay $1,315 in interest on a $40,000 loan at a 5% simple interest rate.

Step-by-step explanation:

To determine the time it took to pay $1,315 in interest on a $40,000 loan at a 5% simple interest rate, you can use the simple interest formula I = PRT, where I is the interest paid, P is the principal amount, R is the rate of interest, and T is the time in years.

Using the information provided, we have I = $1,315, P = $40,000, and R = 5% or 0.05. To find T, we can rearrange the formula to T = I / (PR) and substitute the known values:

T = $1,315 / ($40,000 × 0.05)

Performing the calculation gives us:

T = $1,315 / $2,000 = 0.6575 years or approximately 7.89 months. Therefore, it took less than 8 months to pay $1,315 in interest at a 5% interest rate using exact interest.