Question 1129598: Given an interest of $11,900 at 6% for 50 days (ordinary interest), calculate the principal.
A. $1,428,571.40
B. $1,420.70
C. $1,487,500.00
D. $1,428,005.70
Need the right steps
Found 2 solutions by MathLover1, greenestamps:
Answer by MathLover1(20850)   (Show Source):
Answer by greenestamps(13200)  (Show Source):
You can put this solution on YOUR website!
The problem is VERY badly formulated.
The interest equation is
We are given that the interest I is 11900.
We are given that the annual interest rate is 6%.
We are given that the time is 50 days.
We are not told whether we are to use 360 or 365 (or some other number) for the number of days in a year. Since it is common to use 360, I will do that.
Then our interest equation is
Using 360 for the number of days in a year, the amount of the principal is (exactly) $1,428,000.
That is not one of the answer choices, although answer choice D is close.; and answer A is in the right ballpark.
But here is where the problem is formulated very badly.
If you convert the 6% annual interest rate to a daily interest rate using 360 days per year and us the decimal approximation 0.00016666, you get answer D.
If you convert the 6% annual interest rate to a daily interest rate using 360 days per year and us the decimal approximation 0.0001666, you get answer A.
But NO DECIMAL APPROXIMATION should be used! The EXACT answer, using 360 days per year, is $1,428,000.
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