You borrow $1890 at 3% monthly compounding on February 12th and will pay back the loan on November 24th of the same year.

You borrow $1890 at 3% monthly compounding on February 12th and will pay back the loan on November 24th of the same year. interest is charged for part of a period and use bankers rule

Expert Solution

The daily bankers rule simply assumes that a year contains 360 days instead of the real life 365 days.Secondly, you count the exact number of days you have held the money.

In this case, it appears to be between 12 th Feb and 24 th November

It is not clear whether it is a leap year or not but making a small assumption that the question correpsond to 2020, and 2020 being a leap year

the number of days between 12 Feb and 24 November are 287 days

The borrowed principal amount is $1890 and the payback is on 24 november

The given rate is 3%(annual) compounded monthly, so the monthly periodic interest rate is 3/4 = 0.75%

The bankers rule is a combination of ordinary interest(360 day ) and exact time.

So the payback can be calculated from Compound Interest formula

For bankers rule the number of months is determined by exact time/30.

So Payback = = $2030.0473

jeff jeffy answered 2 years ago

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