Question

Adam Smith received a $875 discount loan to purchase an entertainment center. The loan was offered at 10.5% for 120 days. Find the interest in dollars and the proceeds for the following problem.

Answer 1

interest - $30.63

proceeds-$844.37

Answer 2

Interest = $ 30.59

Proceedings = $ 844.41

Explanation:

Principal = $875

Rate of Interest (r) = 10.5%

Time(t) = 120 days = 0.33 years

n = number of times the interest rate is compounded in one year

⇒ n = 12

`\text{Compound Interest = }Principal* (1+(rate)/(100* n))^(n\cdot t)\\\\\text{Compound Interest = }875* (1+(10.5)/(12* 100))^(12* 0.33)\\\\\bf\implies \textbf{Compound Interest = }\$905.59`

Now, Interest = Compound Interest - Principal

⇒ Interest = 905.59 - 875

= $ 30.59

And the proceedings are = Principal - Interest

= 875 - 30.59

= $ 844.41