3.3 Calculating the Amount of Interest

We will apply the formula:

$I = Prt$

Example 3.3.1

1. How much interest must be paid on a $5,000 loan at 7.5% (per annum or pa) simple for 32 months?

Note:   It is recommended that you always state the data before solving the problem.

$P = $5,000$

$r = 7.5\% \text{ or } 0.075$

$t=\frac{32}{12}\; years$

Therefore:

$I=$5,000\times 0.075 \times \frac{32}{12}=$1,000$

2. How much interest must be paid on a $6,500 loan at 8.5% (per annum or pa) simple if the loan was taken out on February 12, 2023 and repaid on August 15, 2023?

Using Table 3-1:

$t=\frac{227-43}{365}=\frac{184}{365}\; year$

Or using the BAII PLUS:

DT1 = 2.1223 [ENTER]

↓DT2 = 8.1523 [ENTER]

↓[CPT] DBD = 184

Therefore,

$I=$6,500\times 0.085 \times \frac{184}{365}=$278.52$

Your Own Notes

• Are there any notes you want to take from this section? Is there anything you’d like to copy and paste below?
• These notes are for you only (they will not be stored anywhere)
• Make sure to download them at the end to use as a reference