Question

on April 5, 2019 janeen camoct took out an 10.5% loan for $32,000 the loan is due March 9, 2020. use ordinary interest to calculate interest.

what total amount will janeen pay on March 9, 2020? (ignore leap year)

Answer 1

Solution :

The formula for calculating ordinary Interest is

Interest = Principal * Annual Interest Rate * ( Time period of loan in days / 365 )

As per the information given in the question we have

Principal = $ 32,000 ; Annual Interest Rate = 10.5 % = 0.105 ;

Time period of loan in days = Time period in days from April 5, 2019 to March 9, 2020

= 26 + 31 + 30 + 31 + 31 + 30 + 31 + 30 + 31 + 31 + 28 + 9 = 339 days ;

(Since the question requires leap year to be ignored, only 28 days have been considered for the month of February and the total number of days in a year is taken as 365 days )

Applying the above values in the formula we have the ordinary interest as

= $ 32,000 * 0.105 * ( 339 / 365 )

= $ 32,000 * 0.105 * 0.928767

= $ 3,360 * 0.928767

= $ 3,120.657534

The Ordinary interest payable on the loan = $ 3,120.657534

The amount payable by Janeen on March 9, 2020 = Original loan + Ordinary interest payable on the loan

= $ 32,000 + $ 3,120.657534

= 35,120.657534

Thus the total amount Janeen will pay on March 9, 2020 = $ 35,120.657534

= $ 35,120.6575 ( when rounded off to four decimal places )

= $ 35,120.66 ( when rounded off to two decimal places )

= $ 35,121 ( when rounded off to the nearest cent )