Tim Newman took out a simple interest loan of $1500 at a 10 percent interest for 12 months. After 4 payments, the balance is $1100. He pays off the loan when the next payment is due. What is the interest?
Is it $9.17
See previous post: Tue, 4-21-15, :31 PM.
To calculate the interest on a loan, you need to know the principal amount (the original loan amount), the interest rate, and the time period. In this case, Tim Newman took out a simple interest loan of $1500, with an interest rate of 10%, and the loan term is 12 months.
Since Tim made 4 payments and the balance remaining after those payments is $1100, we can calculate the amount he paid off by subtracting the remaining balance from the original loan amount:
Amount paid off = Original loan amount - Remaining balance
Amount paid off = $1500 - $1100
Amount paid off = $400
Now, to calculate the interest, we need to find the interest rate for the remaining balance. Since the loan was for 12 months and Tim paid off the loan after 4 payments, the remaining time period is 12 - 4 = 8 months.
To find the monthly interest rate, we divide the annual interest rate by 12:
Monthly interest rate = Annual interest rate / 12
Monthly interest rate = 10% / 12
Monthly interest rate = 0.10 / 12
Monthly interest rate = 0.0083333 (approximately)
Finally, we can calculate the interest on the remaining balance by multiplying the remaining balance by the monthly interest rate and the remaining time period:
Interest = Remaining balance * Monthly interest rate * Remaining time period
Interest = $1100 * 0.0083333 * 8
Interest = $73.33 (approximately)
So, the interest on Tim Newman's loan is approximately $73.33. Therefore, the answer is not $9.17, but $73.33.