Question

You borrow $30,000 at 9.5% simple interest for 120 days. the terms of the loan use a 365 day year. 1)how much interest will you owe on the maturity date? 2)if you pay the loan off early on day 85, how much interest will you owe? 3) a)you make a $10,000 payment on day 30. find the new balance after making the payment. b)you pay the balance off on day 85.find the final payment.(10 points

Answer 1

1) The applicable formula is
I = Prt
I = $30,000×0.095×(120/365)
I ≈ $936.99

2) The same formula applies.
I = $30,000×0.095×(85/365)
I ≈ $663.70

3a) The interest due on day 30 is
I = $30,000×0.095×(30/365) ≈ $234.25
so the new balance is $30,000 - $10,000 + $234.25 = 20,234.25

3b) The amount due on day 85 is
A = P(1 + rt) = $20,234.25·(1 + 0.095·((85-30)/365))
A = $20,523.90