Chapter 8 Loans
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Step 2: Determine the term of Robert’s loan. Divide the number of days of the
loan by 365.
term =
number of days of the loan
365
term=
76
365
term ≈ 0.208
Step 3: Convert the annual interest rate to a decimal by moving the decimal two
places to the left.
9.25% → 0.0925
Step 4: Determine the amount of interest. Multiply the principal, annual interest
rate, and term.
amount of interest = principal × annual interest rate × term
amount of interest = $1,150 × 0.0925 × 0.208
amount of interest = $22.12
Check It
On August 21, Cheryl obtained a loan for $2,215 from her bank. The annual
percentage rate was 7.35%. She repaid the loan in one payment on November 11.
Determine the amount of interest that Cheryl paid on the loan.
Finding the Interest Rate
If you know the principal of a loan and the interest owed for a one-year term,
you can calculate the interest rate. The following formula can be used:
annual interest rate = annual interest amount ÷ principal
Example 8-1G
See It
Maribel borrowed $4,450 for a one-year term loan. Maribel paid a total of
$317.06 in annual interest. What was Maribel’s annual interest rate?
Strategy
Use the formula:
annual interest rate = annual interest amount ÷ principal