Question

Sue Gastineau borrowed $17,000 from Regions Bank at a rate of 5.5% to open her lingerie shop. The date of the loan was March 5. Sue hoped to repay the loan on September 19. Assuming the loan is based on ordinary interest, Sue will pay back how much in interest expense?

Answer 1

Sue will pay back $507.20 in interest expense.

Explanation:

The formula for calculating simple interest is:

SI = P x r x t ÷ 100

• P = Principal
• r = Rate of Interest
• t = Term of the loan/deposit in years

In the given problem,

• Sue Gastineau borrowed $17,000 from Regions Bank so, P = $17000
• Sue Gastineau borrowed $17,000 from Regions Bank at a rate of 5.5%, so r = 5.5 %
• Number of days of the loan = March 5 to September 19
• Sue borrowed $17,000 from Regions Bank for the period of = 198 days, So t = 198 / 365

Simple Interest = (17000 * (5.5/100) * (198/365))

Simple Interest = (17000 * (0.055) * (0.5424657534246575‬))

Simple Interest = (17000 * (0.055) * (0.5424657534246575‬))

Simple Interest = $507.20