Bill borrows $2400 from Cosa Nostra Loans, who charge 4.7% simple annual interest . If he borrows...

Question:

Bill borrows $2400 from Cosa Nostra Loans, who charge 4.7% simple annual interest . If he borrows the money on March 11, how much does he owe on August 11 of the same year? Note: Use the exact method to determine the number of days.

Computation of Simple Interest

Simple Interest is computed on the initial principal amount and no interest is charged on the subsequent interests earned. Simple interest can by easily calculated using the formula, Interest = Principal x Time x Rate

Answer and Explanation:

Given,

  • Principal = $2,400
  • Simple Interest Rate R = 4.7%
  • Duration of loan is from March 11 to August 10 and repayment on August 11.
  • No of day T = 21+30+31+30+31+10 = 153 days
  • No of days in the year = 365 days

Interest due on $2,400 for 153 days at 4.7% is computed as under:

Interest = Principal x Time x Rate

Interest = 2400 x (153/365) x 0.047

Interest = $47.28

Therefore, the total amount due on August 11 is the sum of initial principal and the interest earned during the period, which comes to $2,400 + $47.28 or $2,447.78


Learn more about this topic:

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How to Find Simple Interest Rate: Definition, Formula & Examples

from Investing: Help & Tutorials

Chapter 2 / Lesson 8
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