Question

Paula Purchaser borrowed $500 at 12 percent for one year. She paid a $25 processing fee.

The interest paid will be?

Answer 1

You will need the formula for the total loan payment. (See attached).

rate(for this formula) = rate/1,200
n=12 months

Total = [(rate*principal)/(1-(1+rate)^-n))]*n
Total = [(.01*500)/(1-(1.01)^-12]*12
Total = [5 / (1 -0.8874492253 ] * 12
Total = [5 / 0.1125507747 ] * 12
Total = (44.4243943392) * 12
Total = 533.09
The interest is 33.09 which I'm guessing does not include the $25 processing fee.

Answer 2

I=(p)(r)(t)
I=(525)(.12)(1)
I=63

You have to add the $500 and the $25 first
The t will always be in years