A new business borrows $320,000 at a yearly simple interest rate of 7%. The total
amount the company repays for the loan and interest is $678,400. How long did it
take to pay off the loan?
Let x be the number of years it took to pay off the loan.
The formula for calculating simple interest is: I = PRT,
where:
I = Interest
P = Principal amount (the amount borrowed)
R = Yearly interest rate (as a decimal)
T = Number of years
Given:
P = $320,000
R = 7% = 0.07
Total amount repaid = $678,400
Interest = Total amount repaid - Principal amount
I = $678,400 - $320,000 = $358,400
Using the formula for simple interest:
I = PRT
$358,400 = $320,000 * 0.07 * x
$358,400 = $22,400x
x = $358,400 / $22,400
x = 16
Therefore, it took 16 years to pay off the loan.