On May 23, Samantha Best borrowed $40,000 from the Tri City Credit Union at 13% for 160 days. The credit union uses the exact interest method. What was the amount of interest on the loan?
$40,000 x 13% x 160 /365 = $2,279.45 the amount of interest on the loan?
To calculate the amount of interest on the loan, we need to use the following formula:
Interest = Principal * Rate * Time
In this case:
- Principal (P) = $40,000
- Rate (R) = 13% (which can be written as 0.13 in decimal form)
- Time (T) = 160 days
Let's break down the calculation step by step:
Step 1: Convert the time from days to years.
Since the interest rate is annual, we need to express time in years. As there are 365 days in a year, we divide the given time by 365 to get the time in years.
So, T = 160 days ÷ 365 = 0.4384 years (rounded to 4 decimal places)
Step 2: Calculate the interest using the formula.
Interest = P * R * T
Interest = $40,000 * 0.13 * 0.4384
Interest = $2,119.36 (rounded to 2 decimal places)
Therefore, the amount of interest on the loan is approximately $2,119.36.