Question

For services rendered, an attorney accepts a 90-day note for $5,500 at 8% simple interest from a client. (Both interest and principal are repaid at the end of 90 days.) Wishing to use her money sooner, the attorney sells the note to a third party for $5,560 after 30 days. What annual interest rate will the third party receive for the investment?

Answer 1

5.395%

Step-by-step explanation:

principal = $5,560

time = 1/6 hours

rate = r

Interest of client = p × t × (r/100)

= 5500 × (1/4) × (8/100)

= $110

Amount paid by client = 5,500 + 110

= 5,610

This is the amount received by third party .

Principal of third party = 5,560

therefore, Interest = 5,610 - 5,560

= $50

i = p × t × (r/100), p = 5,560, t = 2 months = 1/6 years

50 = 5,560 × (1/6) × (r/100 )

r = 3,000 ÷ 556

= 5.395%