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Hello:

To determine interest a loan for a period other than one year use the following:

$400.00 X 5% X 2 1/2 years.

The interest on a loan is in proportion to the time.

How would a proportion be used to represent what is indicated above, that is, "The interest ... is in proportion to the time"?

Would the following be correct?

($50/$20 X $20) = (2 1/2 X 1 year)

I thank you for your reply.

First note that you are calculating simple interest, not compound interest. That is, the interest is based on the principal of the loan, not on any accrued interest.

Let P be the principal (loan amount), r the interest rate per unit of time, t the number of time units, and i the interest earned, then

The interest earned varies directly with principal, rate, and time:

i = Prt

Normally, the unit of time is one year.

Suppose the principal is $400, the rate is 5% per year, and the period is 2.5 years.

i = $400·0.05·2.5 = $50

The interest over 2.5 years is $50.

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