Question

If a loan of 1,500 at 4% is paid off in 90 days what is the interest

Answer 1

Compound interest =$14.58

Simple Interest=$14.79

Explanation:

Let's assume the interest rate charged on the loan was simple in nature.

-Simple interest is calculated using the formula:

`I=PRT,\\\\=1500* 0.04* (90)/(365)\\\\=14.79`

Hence, the simple interest on the loan was $14.79

#If the interest is compound in nature with just one compounding per year:

`A=P(1+i)^n\\\\I=A-P\\\\I=1500(1.04)^(90/365)-1500\\\\=14.58`

Hence, the compound interest charged on the loan is $14.58