a bicycle was purchased for $50 payable in 60 days or at a
discount of 5% for cash. If the purchaser pays in 60 days,
what is the approximate rate of interest per annum being
paid?
If the purchaser had paid when he first got the bike, he
would have paid $50-0.05×$50 = $50-$2.50 = $47.50.
So it is the same as if he had borrowed $47.50 for 60 days
and paid $2.50 interest.
So the principal is $47.50, the interest is $2.50, and
the time is 60/365 = 0.1643835616 of a year. So we solve
I = Prt
for the rate r
and substitute I = 2.50, P = 47.50, and t=0.1643835616
About 32% per annum interest.
Notice that I used 365 days per year instead of 360.
However the answer still rounds to 32% interest even if
we use 360 days per year instead of 365.
Edwin