Question

2. Find the simple interest for the following. Round to the nearest cent.

$7800 at 9.25% for 4 months
3. What is the difference between exact and ordinary interest? Don't forget about leap years.

Answer 1

Simple interest can be calculated as (principal * rate * time) / 100. In this case, $7800 * 9.25 * 4 / 100 = $266.20. So, the simple interest would be $266.20.
Exact interest is the exact amount of interest earned on a loan, calculated to the exact number of days and using a 365-day year or 366-day year for leap years. Ordinary interest is calculated using a 360-day year, regardless of whether it's a leap year or not, and is a simplified method for determining interest on a loan. The difference between the two methods is that exact interest takes into account the exact number of days in a year, while ordinary interest assumes a standard year of 360 days, resulting in a lower interest calculation

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Answer 2

2. $240.50

3. See below

Explanation:

2.

I = Prt

where I = interest

P = principal amount (amount of investment)

r = annual interest rate

t = time in years

t = 4 months = 4/12 year = 1/3 year

r = 9.25% = 0.0925

I = Prt

I = $7800 × 0.0925 × 1/3

I = $240.50

3. Exact interest takes into account every day of the year. In a regular year, there are 365 days. in a leap year, there are 366 days. Exact interest uses the exact number of days of the specific year for interest calculations of less than a year.

Ordinary interest rounds off a year to 360 days, and calculations are based on a year having 360 days, not 365 of 366 days.