Finding the Exact Simple Interest

by Dane
(Cleveland)

Question

Find the interest amount and maturity value for the following loan:
Principal: $585
Interest rate: 9%
Date borrowed: June 5
Date Repaid: Dec 15
Exact time: 193 days

Answer

In simple terms, the question demands finding the interest amount and maturity value on a principal amount of $585 for 193 days at 9% rate of interest.

STEP 1:
Let us start by finding the amount of interest. The basic formula used to calculate simple interest is:

I = Prt.

Here, P denotes the principal, r represents the rate of interest for one year, and t is the time in years.

STEP 2:
Since the time period is 193 days, we need to convert the number of days into an equivalent number of years. It is a known fact that a year consists of 365 days. This means that we have to divide 193 days by 365 days to get the equivalent number of years.

Also, it will be desirable to convert the rate of interest to a decimal by dividing it by 100.

STEP 4:
Our aim next is to find the maturity value. This can be achieved using the formula:
S = P(1 + rt).

Since the values of all the variables in the formula are known, we can directly substitute and get the result.