Question

Marie took out a loan for 7
months and was charged simple interest at a rate of 5.5%
. If the amount of the loan was $425
, what is the amount of interest she had to pay?
$1,363.54
$163.63
$13.64
$13.63

Answer 1

To calculate the simple interest on a loan, use the formula:

\[
I = P \times r \times t
\]

where:
- \( I \) is the interest,
- \( P \) is the principal amount (the amount of the loan),
- \( r \) is the rate of interest (as a decimal),
- \( t \) is the time the money is borrowed for (in years).

In this case:
- \( P = 425 \) (the amount of the loan),
- \( r = 5.5\% = 0.055 \),
- \( t = \frac{7}{12} \) (since the time is in months, convert it to years).

Now, substitute the values into the formula:

\[
I = 425 \times 0.055 \times \frac{7}{12}
\]

Calculating \( \frac{7}{12} \):

\[
\frac{7}{12} \approx 0.5833
\]

Now plug that into the formula:

\[
I = 425 \times 0.055 \times 0.5833
\]

Calculating:

1. Calculate \( 425 \times 0.055 \):

\[
425 \times 0.055 = 23.375
\]

2. Now multiply by \( 0.5833 \):

\[
I \approx 23.375 \times 0.5833 \approx 13.68
\]

So the interest is approximately $13.68. Since the options provided are:

- $1,363.54
- $163.63
- $13.64
- $13.63

The closest option to our calculation is **$13.64**.