Find the amount of interest on a loan of $5000 at 9% for 238 days using ordinary interest method?
For a given principal amount, P, the ordinary interest (at a rate of r% per annum) can be calculated for a duration of t years can be calculated by using the following equation:
Interest = P x r x t / 100
In the given case, the principal amount is $5000, that is P = $ 5000
The rate of interest, r = 9% per annum
The time duration, t =238 days
Since the rate of interest is provided on per year basis, we also need to convert time duration to year basis. For ordinary interest, we assume 360 days per year, the time duration is
t = 238 days = 238/360 years
Thus, the simple or ordinary interest is
Interest = 5000 x 9 x (238/360) / 100 = $ 297.5
Hence the ordinary interest for the given duration is $297.50.