Chapter 10, Problem 33AT

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

Chapter
Section

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

Laurie Carron borrowed $16,000 at 14% ordinary interest for 88 days. On day 30 of the loan, she made a partial payment of$7,000. What was the new maturity value of the loan?

To determine

To calculate: The maturity value of loan where principal amount of loan is $16,000, rate of ordinary interest is 14%, duration of loan is 88 days but after 30 days, partial payment of$7,000 was repaid.

Explanation

Given Information:

Principal amount of loan is $16,000, rate of ordinary interest is 14%, duration of loan is 88 days but after 30 days, partial payment of$7,000 was repaid.

Formula used:

The formula to compute simple interest is,

I=PRT

Where, I is the amount of interest, P is the principal amount, R is the rate of interest, and T is the time duration.

The formula to calculate Maturity value is,

MV=P(1+RT)

Where, MV is Maturity value, P is Principal Amount, R is the rate of interest, and T is the time duration.

Calculation:

Consider that principal amount is $16,000, rate of interest is 14%, time duration is 30 days. Simplify the rate of interest as, 14%=14100=0.14 Substitute$16,000 for amount of interest, 0.14 for rate of interest, 30360 for time duration in the formula, I=PRT.

I=PRT=16,000×0.14×30360=$186.67 Hence, rate of interest is$186.67.

Out of the repayment of $7,000 that was made within 30 days, it included interest amount of$186.67

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