Question

If you paid $26 to a loan company for the use of $1,129 for 151 days, what annual rate of interest did they charge? (Assume a 360-day year)

Answer 1

Explanation:

To find the annual rate of interest, we first need to calculate the total interest paid over the 151-day period. We can use the formula:

Interest = Principal x Rate x Time

where Principal is the amount borrowed, Rate is the annual interest rate (which we are trying to find), and Time is the time period in years.

Since the loan company assumes a 360-day year, we need to convert the 151-day period into a fraction of a year:

Time = 151 / 360 = 0.4194

Now we can plug in the given values and solve for the rate:

26 = 1,129 x Rate x 0.4194

Rate = 26 / (1,129 x 0.4194) = 0.0599 or 5.99%

Therefore, the loan company charged an annual interest rate of 5.99%.