Question

Sabrina charged $800 at the local sporting goods store to buy some exercise equipment. The store offers no interest for 90 days if the balance is paid in full, or 24% interest annually of the balance is not paid in full prior to the 90 days. How much interest will she need to pay if she lets the account go for 91 days before paying the bill?

a) $192
b) $48
c) $384
d) $96

Answer 1

Sabrina will need to pay $473.76 in interest if she lets the account go for 91 days.

Step-by-step explanation:

To calculate the interest Sabrina will need to pay if she lets the account go for 91 days, we first need to calculate the balance after 90 days. Since the interest is 24% annually, the daily interest rate can be calculated as 24% / 365. To find the balance after 90 days, we multiply the original balance of $800 by (1 + daily interest rate) raised to the power of 90. The interest will be the difference between the balance after 90 days and the original balance. Let's calculate:

1. Daily interest rate: 24% / 365 = 0.0658%
2. Balance after 90 days: $800 * (1 + 0.000658)^{90} = $800 * 1.5922 = $1,273.76
3. Interest: $1,273.76 - $800 = $473.76

Therefore, Sabrina will need to pay $473.76 in interest if she lets the account go for 91 days.