Question

Karen borrows $4350 on March 5, 2015 to be repaid with interest on June 27, 2015. Using Banker's Rule, find the amount due on June 27, 2015 if...

a)...a 14.25% simple interest rate was used in the transaction.
b)...a 14.25% bank discount rate was used in the transaction.

Answer 1

To find the amount due on June 27, 2015 using Banker's Rule with a 14.25% simple interest rate, the amount due is $5117.34. For a 14.25% bank discount rate, the amount due is $3582.66.

Step-by-step explanation:

To find the amount due on June 27, 2015 using Banker's Rule:

1. For a simple interest rate of 14.25%, we can calculate the interest (I) using the formula:
   
   I = Principal * Rate * Time.
   
   In this case, Principal = $4350, Rate = 14.25%, and Time = 1 year and 3 months.
   
   So, I = $4350 * 0.1425 * (1+3/12) = $4350 * 0.1425 * 1.25 = $767.34.
2. To find the amount due, we add the interest to the principal:
   
   Amount Due = Principal + Interest = $4350 + $767.34 = $5117.34.

For a bank discount rate of 14.25%, we can calculate the discount (D) using the formula:

D = Principal * Rate * Time.

In this case, Principal = $4350, Rate = 14.25%, and Time = 1 year and 3 months.

So, D = $4350 * 0.1425 * (1+3/12) = $4350 * 0.1425 * 1.25 = $767.34.

To find the amount due, we subtract the discount from the principal:

Amount Due = Principal - Discount = $4350 - $767.34 = $3582.66.