   Chapter 10.II, Problem 35RE ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

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

# Pamela Boyd borrowed $20,000 at 6.5% ordinary interest for 150 days. On day 30 of the loan, she made a partial payment of$8,000. What is the new maturity value of the loan?

To determine

To calculate: The maturity value of loan taken by Pamela Boyd where principal amount of loan is $20,000, rate of ordinary interest is 6.5% for a duration of 150 days but after 30 days, partial payment of$8,000 was repaid.

Explanation

Given Information:

Principal amount of loan is $20,000, rate of ordinary interest is 6.5%, duration of loan is 150 days but after 30 days, partial payment of$8,000 was repaid.

Formula used:

Compute the time using ordinary interest method as,

Time=Number of days of a loan360

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 $20,000, rate of interest is 6.5%, time duration is 30 days. Simplify the rate of interest as, 6.5%=6.5100=0.065 Compute the time using ordinary interest method as, Time=Number of days of a loan360=30360 Substitute$20,000 for amount of interest, 0.065 for rate of interest, 30360 for time duration in the formula

I=PRT=20,000×0.065×30360=$108.34 Hence, rate of interest is$108.33.

Out of the repayment of $8,000 that was made within 30 days, it included interest amount of$108

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