Question

Earl's savings account has an APR of 7.3%, calculates interest daily, and pays interest at the end of the month. If during the month of June, his balance was $400 for the first 10 days of the month, $1500 for the next 10 days of the month, and $600 for the last 10 days of the month, how much total interest did Earl earn in June? A. $2.30 B. $2.80 C. $5.00 D. $3.00

Answer 1

400×0.073×(10÷365)+1,500
×0.073×(10÷365)+600
×0.073×(10÷365)
=5

Answer 2

APR is the annual percentage rate. To get daily percentage rate, we need to divide APR by 365. We have,

daily rate =
`(7.3)/(365)=0.02` (in percentage). In decimal it is
`(0.02)/(100) =0.0002`.

To get total interest, we calculate it accordingly:

• For first 10 days, he gets daily interest of 0.02% on $400:

`400(0.0002)(10)=0.8`

• For next 10 days, he gets daily interest of 0.02% on $1500:

`1500(0.0002)(10)=3`

• For the last 10 days, he gets daily interest of 0.02% on $600:

`600(0.0002)(10)=1.2`

Earl's total interest is the sum of these three,

`0.8+3+1.2=5` dollars. Answer choice C is correct.

ANSWER: C