# Compute the principal for the loan. Use ordinary interest when time is stated in days. Rate =9% Time= 6months Interest=\$675

Find the principal (original) amount if \$675 "ordinary" interest accrues after 6 months.

Depending on your definition of "ordinary" interest as being simple interest:

P = ? (the unknown)

rate (`r` ) = 0.09 (or `9/100` ) /

time period (`t` )= 6 months which is 0.5 of a year /

interest accrued (`I` ) = \$675

We know that `I = P times r times t`

Substitute what you know into the formula:

\$675 = `P` `times 0.09 times 0.5`

Now solve for `P`

`675 = P times 0.045 `

`therefore 675/0.045 = P`

`therefore P = \$15000`

There is another definition of "ordinary" interest being based on a 30-day month (= 360 days in a year), in which case a standard 6 months (ie of 365 days) becomes 0.50694 of a year of 360 days instead of 0.5 of a standard year.

Answer based on a standard calculation of simple interest = `\$15000`

Approved by eNotes Editorial Team

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