On September 4 Fred made a $25,000 loan to Ricky for an investment that was guaranteed to earn an interest rate of 40%. On March 11 of the following year, Ricky cashed in his investment and received the interest as had been promised. How much interest had he earned?
A) $2,965
B) $5,151
C) $2,186
D) $4,849
E) $16,083

Question

Quizplus · Accepted Answer

The interest is calculated using simple interest formula: Interest = Principal x Rate x Time. The time from September 4 to March 11 is 188 days, or approximately 0.515 years. So, Interest = $25,000 x 0.40 x 0.515 = $5,150.

On September 4 Fred Made a $25,000 Loan to Ricky