SOLUTION: Indira paid interest charges of $189.93 on a $4,870 invoice that was two months overdue. What monthly rate of simple interest was she charged?

Question 942189: Indira paid interest charges of $189.93 on a $4,870 invoice that was two months overdue.

What monthly rate of simple interest was she charged?

Answer by TimothyLamb(4379) (Show Source): You can put this solution on YOUR website!
compound-interest formula:
v = p( 1 + (r/n) )^(nt)
where:
v = final value
p = initial (principal) value
r = interest rate (as a decimal)
n = number of compounding periods per year
t = number of years
---
get the interest amount:
i = v - p
i = p( 1 + (r/n) )^(nt) - p
189.93 = 4870*( 1 + (r/1) )^(1*2) - 4870
189.93 = 4870*( 1 + r )^2 - 4870
4870*( 1 + r )^2 = 4870 + 189.93
( 1 + r )^2 = (4870 + 189.93)/4870
sqrt( ( 1 + r )^2 ) = sqrt( (4870 + 189.93)/4870 )
1 + r = sqrt( (4870 + 189.93)/4870 )
r = sqrt( (4870 + 189.93)/4870 ) - 1
r = 0.0193134944658
---
monthly rate = 0.0193134944658 * 100
monthly rate = 1.93135%
---
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