Accounting and Finance Foundations

Unit 10

Accounting and Finance Foundations Unit 10: Credit 776

Credit

Chapter 22

Lesson 22.9 Calculating Interest and the

Time Value of Money (cont’d)

Examples

1. Find the interest paid on a loan of $2,400 for one year with an interest rate of 11%.


2. Find the interest rate on a loan if the amount borrowed is $850; total interest is $120; and the
   length of the loan is 2 years.


3. Find the time or length of the loan if the principal is $470; the interest rate is 12%; and the total
   interest is $135.

Solutions

1. Find the interest paid on a loan of $2,400 for one year with an interest rate of 11%.
   I = P x R x T
   I = $2,400 x 0.11 x 1
   I = $264


2. Find the interest rate on a loan if the amount borrowed is $850; total interest is $120; and the
   length of the loan is 2 years.
   R = I / (P x T)
   R = $120 / ($850 x 2)
   R = $120 / $1,700
   R = 7.05%


3. Find the time or length of the loan if the principal is $470; the interest rate is 12%; and the total
   interest is $135.
   T = I / (P x R)
   T = $135 / ($470 x 0.12)
   T = $135 / $56.40
   T = 2.39 years

Student Guide