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Question 566775: I get these questions wrong every time. they are the only only ones i miss, and they are keeping me from finishing this class! ive tried both asnswers in () but neither is right. what do i do to solve these? ):
1a) Kim’s Garage borrows $7300 at 10% for 30 days. Find the amount of simple interest that is due.
$ (60.83) (730.00)
1b)What is the total amount that must be repaid after 30 days?
$ (7360.83) (8030.00)
2a)A company borrows $5000 at 6% for 60 days. Find the amount of simple interest that is due.
$ (50.00) (300.00)
2b)What is the total amount that must be repaid after 60 days?.
$ (5050.00) (5300.00)
Found 2 solutions by bucky, scott8148:
Answer by bucky(2189)   (Show Source):
You can put this solution on YOUR website! Maybe by discussing this loan a little bit, I can help you to find your problem.
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Let's start with this ... what does a 10% loan mean. It sure doesn't mean that in a day, a week, or a month you owe 10% interest on the principal. Usually when you see the interest rate on a loan, that rate involves the cost of borrowing the principal for a year. And in finance, usually a year is considered to be 360 days, not 365 days.
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So for the first problem, we can find out how much Kim's garage owes in interest each day for 30 days. Let's start by dividing the 10% rate of interest by 360 days to determine the rate of interest each day. 10% is equivalent to a rate of 0.10 per year. So the daily rate of interest is:
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0.10/360 = 0.0002777777778
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(If you divide 0.10 by 360 on a calculator you may see the answer as:
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2.777777778^(-04)
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The exponent means take the number that you see and move its decimal 4 places to the left so that you have as the answer 0.0002777777778).
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So that is the daily rate of interest. And for the 30 days that Kim's garage borrows the money the rate for 30 days is found by multiplying the 30 days times the daily rate as follows:
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30 * 0.0002777777778 = 0.008333333333 [or its equal of 8.333333333^(-03)]
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That's the rate of interest for the full 30 day period. If you multiply that rate times the $7300 principal you get the answer. The interest owed will be:
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$7300 * 0.008333333333 = $60.83333333
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and this rounds to $60.83 of interest.
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After the 30 day period, Kim's garage is required to pay back the principal of $7300 plus the interest of $60.83 for a total payback of $7360.83
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The second problem is identical to the first problem, with the exception that the figures change.
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When the 6% or .06 annual rate of interest is divided by 360 days in the year, the daily rate of interest turns out to be: 0.0001666666667. Since the loan is for 60 days multiply this daily rate by 60 to get a rate of 0.01 for the 60 days. The amount of interest for the 60 day loan is then found by multiplying the principal of $5,000 times 0.01 which results in $50.00 of interest. Therefore, at the end of the 60 days, the company must return the principal plus the interest, or $5,000 + $50 = $5050 is due.
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I hope this information helps you to find where you were having difficulty.
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Answer by scott8148(6628)  (Show Source):
You can put this solution on YOUR website! full disclosure: I am not a financial person
I think that you are supposed to use 360 days as a year
___ so 30 days is 1/12 of a year
10% simple interest on $7300 is $730
___ but the loan is for 1/12 of a year, so the interest is 1/12 or $60.83
the repayment amount is the loan amount plus the interest ___ $7360.83
the 2nd question is the same technique, except the interest rate is 6% and the time is 1/6 of a year
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