ahmad borrowed $500 from a lender that charged simple interest at an annual rate of 7%. when ahmad paid off…
ahmad borrowed $500 from a lender that charged simple interest at an annual rate of 7%. when ahmad paid off the loan, he paid $175 in interest. how long was the loan for, in years? if necessary, refer to the list of financial formulas.
Answer
Explanation:
Step1: Recall simple - interest formula
The simple - interest formula is $I = Prt$, where $I$ is the interest, $P$ is the principal amount, $r$ is the annual interest rate (in decimal form), and $t$ is the time in years. We are given that $I = 175$, $P=500$, and $r = 0.07$ (since $7%=0.07$).
Step2: Rearrange the formula to solve for $t$
Starting with $I = Prt$, we can solve for $t$ by dividing both sides of the equation by $Pr$. So, $t=\frac{I}{Pr}$.
Step3: Substitute the given values into the formula for $t$
Substitute $I = 175$, $P = 500$, and $r=0.07$ into the formula $t=\frac{I}{Pr}$. $t=\frac{175}{500\times0.07}$ First, calculate $500\times0.07 = 35$. Then, $t=\frac{175}{35}=5$.
Answer:
5