Bob takes a loan of $7,000 on 5% interest rate for 5 months. How do you calculate the simple interest?

Question

Eva Adamson · Accepted Answer

Simple Interest = $145.83

Here, loan (P)= $7,000, Rate of Interest (R) = 5% and years (T) = 5 months / 5 = 5/12 years. We know, Simple Interest #(I) = [PRT]/100# So, #I = [7,000*5*5/12]/100 = [875]/6 = 145.83#

Avery Alexander · Answer

undefined To calculate the simple interest, you can use the formula:

Simple Interest = Principal × Rate × Time

Where:
- Principal (P) is the initial amount borrowed (in this case, $7,000).
- Rate (R) is the interest rate per time period (in this case, 5% per year).
- Time (T) is the time the money is borrowed for, usually in years (in this case, 5 months converted to years).

First, convert the time from months to years:
$$ \text{Time (in years)} = \frac{\text{Time (in months)}}{12} $$
$$ \text{Time (in years)} = \frac{5}{12} $$

Now, plug the values into the formula:
$$ \text{Simple Interest} = \$7,000 \times 0.05 \times \frac{5}{12} $$

$$ \text{Simple Interest} = \$7,000 \times 0.05 \times 0.4167 $$

$$ \text{Simple Interest} ≈ \$145.83 $$

Therefore, the simple interest on the loan is approximately $145.83.