Question - Calculating Simple Interest for Given Principal Amount, Interest Rate, and Time
Solution:
To solve for the simple interest, the formula that is used is:Simple Interest (SI) = P * r * tWhere:P = principal amount (initial amount of money)r = annual interest rate (as a decimal)t = time the money is invested or borrowed for, in yearsIn this problem, you are given:P = $542r = 0.045% per dayt = 3 monthsFirst, let's convert the daily interest rate to an annual rate and the time to years.Since the problem assumes 360 days in a year, we can find the annual interest rate by multiplying the daily rate by 360:r_annual = 0.045% * 360 = 16.2%We must express this as a decimal when using it in our calculation, so:r_annual = 16.2 / 100 = 0.162Now convert the time to years. There are 12 months in a year, so:t_years = 3 months / 12 = 0.25 yearsNow we can apply these values to the simple interest formula:SI = P * r * tSI = $542 * 0.162 * 0.25Now calculate the simple interest:SI = $542 * 0.0405SI = $21.951Rounding to the nearest cent, the simple interest for 3 months is:$21.95Therefore, the simple interest on $542 at 0.045% per day for 3 months is $21.95.
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