Question

Mario used their line of credit to pay some vendor invoices that offered them a 1% cash discount. The annual interest rate on their line of credit is 9%. If they used $9,000 of their line of credit to pay the vendor invoices, how much interest would they pay on their line of credit, if they repaid the balance in two months?

Answer 1

Mario would pay $112.50 in interest on their $9,000 line of credit with a 9% annual interest rate if they repaid the balance in two months, using the simple interest formula.

Step-by-step explanation:

To calculate the interest on a line of credit, you can use the simple interest formula: Interest = Principal × Rate × Time. In the case of Mario, who used $9,000 from their line of credit with an annual interest rate of 9%, we would need to find the interest for a period of two months.

First, convert the annual interest rate to a monthly rate by dividing by 12 (since there are 12 months in a year):

Monthly interest rate = 9% ÷ 12 = 0.75%

Next, convert the time period from months to years (since the rate is an annual rate):

Time in years = 2 months ÷ 12 = 1/6 year

Now, apply these values to the simple interest formula:

Interest = $9,000 × 0.0075 × 1/6 = $112.50

Therefore, Mario would pay $112.50 in interest on their line of credit if they repaid the balance in two months.