Question

On September 12, Jody Jansen went to Sunshine Bank to borrow $4,500 at 11% interest. Jody plans to repay the loan on January 27. Assume the loan is on ordinary interest. (Use Days in a year table)

What interest will Jody owe on January 27?
Note: Do not round intermediate calculations. Round your answer to the nearest cent.

Answer 1

Jody will owe $166.42 in interest on a $4,500 loan at an 11% interest rate, after 137 days, calculated using ordinary interest on a 360-day year.

Step-by-step explanation:

To calculate the interest Jody will owe on January 27 for a $4,500 loan taken on September 12 at an 11% interest rate using ordinary interest, we first need to determine the number of days the loan is outstanding.

From September 12 to January 27 is 137 days (17 days in September, 31 days in October, 30 days in November, 31 days in December, and 28 days in January).

Ordinary interest uses a 360-day year for calculations, so the formula for the interest is I = PRT, where P is the principal amount, R is the annual interest rate as a decimal, and T is the time in years.

Using the formula, we calculate interest as follows:

• Principal (P): $4,500
• Annual Interest Rate (R): 11% or 0.11
• Time (T): 137/360 years

Interest (I) = $4,500 × 0.11 × (137/360) = $166.42

Therefore, Jody will owe $166.42 in interest on January 27.