Simple interest is a method of calculating interest on an amount for n period of time with a rate of interest of r. The number of years for which James took the loan is 5.
<h3>What is simple interest?</h3>
Simple interest is a method of calculating interest on an amount for n period of time with a rate of interest of r. It is calculated with the help of the formula,
Amount after T years = P + SI
SI = PRT
where SI is the simple interest, P is the principal amount, R is the rate of interest, and T is the time period.
James paid off the loan on his motorboat in the year 2006. He originally borrowed $6500 to buy the boat, but with simple annual interest, he discovered that he paid a total of $8775 over the life of the loan. Also, the annual interest rate is 7%. Therefore,
A = P + (PRT)
8775 = 6500 + (6500×0.07×T)
2275 = 6500×0.07×T
T = 5
Hence, the number of years for which James took the loan is 5.
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