Borrower obtained a straight-term loan of $20,000 at 6 percent interest. The loan was paid in full 1 year, 2 months and 6 days later. What was the total interest? (Use a 360-day year)

Answers

Answer 1

Note that  the total interest paid on the loan was $1,866.67.

What is the explanation for the above response?

To solve this problem, we need to first calculate the total number of days the loan was outstanding.

1 year, 2 months and 6 days is equal to 14 months and 6 days or 446 days (assuming a 30-day month and a 360-day year).

Next, we can calculate the total interest paid by using the simple interest formula:

Interest = Principal x Rate x Time

Where:

Principal = $20,000

Rate = 6%

Time = 446/360 years

Time is expressed in years because we are using a 360-day year.

Plugging in the values:

Interest = $20,000 x 0.06 x (446/360)

Interest = $1,866.67

Therefore, the total interest paid on the loan was $1,866.67.

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