Question

What is the rate of interest on a loan of $2,000, for 284 days, if the amount of interest is $93.37, using the exact interest method? (round your answer to the nearest tenth percent)?

Answer 1

Exact interest method is using 365 days instead of 360.

We are going to use the formula: I = Prt, we will derived the formula of rate.

r = I /Pt would be our formula, plugging in our amounts.

r = 93.37 / 2000 / (284/365)

= 93.37 / 2000 (0.7781)

= 93.37 / 1556.1643

= 0.06 or 6% when converted to percent.

To check:

I = Prt

= 2000 x 0.06 x 284/365

= 120 x 0.7781

= 93.37