Question

A radio commercial for a loan company​ states: "You only pay 29¢ a day for each​ $500 borrowed." If you borrow $2,603 for 195 ​days, what amount will you​ repay, and what annual interest rate is the company actually​ charging?

Answer 1

For a loan of $2,603 borrowed for 195 days, the total amount repaid is $43.74. The annual interest rate charged by the company is 7.99%.

Step-by-step explanation:

To calculate the amount you will repay, we need to determine the number of 29¢ increments needed to cover the loan amount. Since each $500 borrowed costs 29¢ per day, we can calculate the number of increments by dividing the loan amount by $500 and multiplying it by 29. So, for a loan of $2,603 and 195 days, the number of increments will be (2603/500) * 29 = 150.94.

To calculate the repayment amount, we multiply the number of increments by 29¢. So, the total amount repaid will be 150.94 * 29¢ = $43.74.

To find the annual interest rate, we need to calculate the total interest paid over 195 days. The interest per day is $0.29, so the total interest paid will be 195 * $0.29 = $56.55. Now we can calculate the annual interest rate by dividing the total interest paid by the loan amount and multiplying it by 365 days. So, the annual interest rate is ($56.55 / $2,603) * 365 = 7.99%.