Question

Carol Miller went to Europe and forgot to pay her $740 mortgage payment on her New Hampshire ski house. For her 59 days overdue on her payment, the bank charged her a penalty of $15. What was the rate of interest charged by the bank? (Use 360 days a year. Do not round your intermediate calculations. Round your answer to the nearest hundredth percent.)

Answer 1

The annualized interest rate charged by the bank for Carol Miller's 59 days overdue $740 mortgage payment with a $15 penalty was 12.36%.

Step-by-step explanation:

The student asked what the rate of interest charged by the bank was for a $740 mortgage payment that was 59 days overdue, with a $15 penalty. The bank uses a 360-day year for its calculations. To find the interest rate, you can use the formula for simple interest I = PRT, where I is the interest charged, P is the principal amount, R is the rate of interest, and T is the time in years.

To solve for the rate (R), rearrange the formula: R = I / (PT). Here, I = $15, P = $740, and T = 59/360 years. Plugging in the numbers, R = $15 / ($740 * (59/360)) = $15 / $121.33, which equals 0.1236 or 12.36%. Therefore, the annualized interest rate charged by the bank for the late payment was 12.36%.