Final answer:
To calculate the interest on a $5,895 loan at 5% simple interest over 4 months, the monthly interest rate is roughly 0.0041667 and the time in years is 1/3. The simple interest is thus approximately $65.00.
Step-by-step explanation:
To calculate the interest earned on a loan of $5,895.00 over 4 months at an annual simple interest rate of 5%, we can use the formula for simple interest, which is Interest = Principal × rate × time.
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 = Annual Interest Rate / 12
- Monthly Interest Rate = 0.05 / 12 = 0.0041667 (approximately)
Then, calculate the time in years, since the interest rate is per annum:
- Time in years = 4 months / 12 months/year = 1/3 year.
Now we can calculate the interest:
- Interest = $5,895.00 × 0.0041667 × 1/3
- Interest = $65.00 (approximately)