Richard took a loan of $10000 at a rate of 5%. If he paid $2500 in interest, how long did it take him to pay off the loan?
Assume simple interest.
So for $10,000, the annual interest is $10,000*0.05=$500.
Number of years = $2500/$500 = 5 years.
To determine how long it took Richard to pay off the loan, we can use the formula for simple interest:
Interest = Principal * Rate * Time
Given that the principal (loan amount) is $10,000, the interest paid is $2,500, and the rate is 5%, we can rearrange the formula to solve for time:
Time = Interest / (Principal * Rate)
Substituting the values into the formula:
Time = $2,500 / ($10,000 * 0.05)
Calculating the equation:
Time = $2,500 / $500
Time = 5 years
Therefore, it took Richard 5 years to pay off the loan.