Question

Calculate the simple interest due(in dollars) on a 3 months loan of $2900 if the annual simple interest rate is 8.5% round to the nearest cent

Answer 1

$61.63

Explanation:

The simple interest on a loan is calculated using the formula:

`\text{Simple Interest}=(PRT)/(100)\text{ where }\begin{cases}P=\text{Principal} \\ R=\text{Rate (in \%)} \\ T=\text{Time (in years)}\end{cases}`

From the given problem:

• The principal, P = $2,900

,

• The annual simple interest rate = 8.5%

,

• Time = 3 months.

Note that the Time has to be in years, so we convert:

`T=3\text{ months}=(3)/(12)\text{ years}`

Substitute all the values into the formula:

`\begin{gathered} \text{Simple Interest}=(2900*8.5*(3)/(12))/(100) \\ =29*8.5*(1)/(4) \\ =\$61.63 \end{gathered}`

The simple interest due is $61.63 (correct to the nearest cent).