Question

you are going to borrow $71500.00 for 200 days you are to be loaned the money at an interest rate of 7.5% and you are given the option to choose exact or ordinary interest which would you choose ? show both camputation and explain Please show me example or math steps

Answer 1

given,

Amount borrowed = $71500

Time = 200 days

interest rate = 7.5 %

ordinary interest rate for year =
`71500* (7.5)/(100)`

= $5362.5

exact interest rate for the year =
`71500* (7.5)/(100)* (200)/(365)`

= $2938.35

hence, the exact interest rate is less than the ordinary interest rate which means you should choose exact interest rate.