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A man needed money for college. He borrowed $5,000 at 16% simple interest per year. If he paid $200 interest, what was the duration of the loan?

Sagot :

We have a simple interest case. In this kind of situation, we have to use the next formula for simple interest:

[tex]I=P*R*T[/tex]

Where:

• I is the earned interest. In this case, we have I = $200.

,

• P is the Principal amount (that is, the amount the man borrowed in this case). In this case, we have P = $5,000.

,

• R is the interest rate. In this case, we have I = 16% = 16/100.

,

• T is time transcurred to get the earned interest. This is the unknown value we are about to find.

Therefore, we have:

[tex]\begin{gathered} I=\text{ \$200} \\ P=\text{ \$5,000} \\ R=\frac{16}{100}=0.16 \end{gathered}[/tex]

Then we have:

[tex]200=5000(0.16)*T[/tex]

Now, we need to divide both sides of the equation by the product 5000(0.16) to solve for T as follows:

[tex]\begin{gathered} \frac{200}{5000(0.16)}=T \\ \\ T=\frac{200}{800}=0.25 \end{gathered}[/tex]

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