Question

Jay Field’s bank granted him a single-payment loan of $6,800. He wanted to compare repaying the loan in 91 days at an ordinary interest rate of 4.25% to repaying the loan in 91 days at an exact interest rate of 4.23%. Which interest rate is a better deal for Jay? How much does he save?

Answer 1

I don't know if you still need help with this, but the answer is exact interest and he saves $1.34.

Answer 2

Amount of loan = $6800

Time period = 91 days

When interest rate is 4.25%

`Amount = 6800*(1+(4.25)/(12* 100))^{12*(91)/(30* 12)}\\\\Amount=\$6873.32`

When interest rate is 4.23%

`Amount = 6800*(1+(4.23)/(12* 100))^{12*(91)/(30* 12)}\\\\Amount=\$6872.96`

So, the amount paid with 4.23% interest rate is less

Hence, 4.23% interest rate is a better deal for Jay.

Amount saved = 6873.32 - 6872.96

= $0.36