Question

If Tammy takes out a discounted loan for $850 at a simple interest rate of 12%, but only receives $800 into her bank account, what's the duration of the loan? Give your answer in months to the nearest month.

Answer 1

Answer : The duration of the loan is, 6 months

Step-by-step explanation :

First we have to determine the discounted money.

Discounted money = $850 - $800 = $50

Thus, interest = $50

Now we have to determine the time of loan.

Formula used :

$S.I=\frac{PRT}{100}$

where,

P = principle

R = interest rate

T = time

S.I = simple interest

Now put all the given values in the above formula, we get:

For 1 year : $\ 50=\frac{(\ 850)\times (12)\times T}{100}$

For 12 months : $\ 50\times 12=\frac{(\ 850)\times (12)\times T}{100}$

$T=5.88month\approx 6month$

Thus, the duration of the loan is, 6 months