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1 September, 12:35

Tyler has a single-payment loan of $3,200. He is paying back the loan in 92 days with an ordinary interest rate of 8.75%. What is the interest owed? What is the maturity value of the loan?

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  1. 1 September, 14:11
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    Step-by-step explanation:

    We would apply the formula for determining simple interest which is expressed as

    I = PRT/100

    Where

    I represents interest paid on the loan.

    P represents the principal or amount taken as loan

    R represents interest rate

    T represents the duration of the loan in years.

    From the information given,

    P = $3200

    R = 8.75%

    T = 92 days

    Ordinary interest is calculated on the basis of 360 days in a year. Converting 92 days to year, it becomes

    92/360 = 0.256 year

    Therefore,

    I = (3200 * 8.75 * 0.256) / 100

    I = $71.68

    the interest owed is $71.68

    the maturity value of the loan is

    3200 + 71.68 = $3271.68
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