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Word Problems/Interest Rates

Question
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)

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.
Questioner's Rating
 Rating(1-10) Knowledgeability = 10 Clarity of Response = 10 Politeness = 10 Comment Thanks for the reply even though it was not quite what I wanted!

Word Problems

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Janet Yang

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