Question

A company has a 6-month loan for $1,000 at 10% interest. Determine the amount of interest the company will pay in the 6-month period using this equation: (number of months divided by 12) multiplied by (interest percentage multiplied by loan amount). Select one.

Answer 1

To calculate the amount of interest the company will pay on the loan, we can use the formula you provided:

\[
\text{Interest} = \left( \frac{\text{number of months}}{12} \right) \times \left( \text{interest percentage} \times \text{loan amount} \right)
\]

Given:
- Number of months = 6
- Interest percentage = 10% (or 0.10 when expressed as a decimal)
- Loan amount = $1,000

Plugging in the values:

\[
\text{Interest} = \left( \frac{6}{12} \right) \times \left( 0.10 \times 1000 \right)
\]

First, calculate \( \frac{6}{12} \):

\[
\frac{6}{12} = 0.5
\]

Next, calculate \( 0.10 \times 1000 \):

\[
0.10 \times 1000 = 100
\]

Now, substitute these values back into the equation:

\[
\text{Interest} = 0.5 \times 100 = 50
\]

Thus, the company will pay **$50** in interest over the 6-month period.