Answer to Question #261715 in Financial Math for Mary

Question

4. Diane has a loan with an interest rate of 6%. The amount of interest is P43.75 for a period of 75 days. How much is her loan using ordinary interest method?

5. Angela read an advertisement for a P50,000 loan. The ad informs the borrower that the company only charges 18% annual interest. If she plans to borrow that amount and repays it at the end of the year, how much is the interest? What is the interest of each month?

Answer 1

4.

According to ordinary interest method ,

$I = P.r \times (\frac{D}{360})$

I - Interest is the amount paid on the borrowed money by the debtor. (43.75) 

P - Principal is the actual amount taken from the bank/creditor.

r - rate of interest $( 6\% = \frac{6}{100})$

D - Maturity period.(75 days or 0.208 year)

$I = \frac{P\times r\times n }{100}\\ 43.75 =( P \times 6\times 0.208) /100\\ P = \frac{(100\times43.75)}{(6\times 0.208)}\\ P = \frac{4375 }{ 1.25} \\ P =3500$

 

The loan amount is 3500.

5.

Interest = Principal × Interest rate

$= 50,000(0.18)\\ = 9000$

Interest per annum = 9000

 

Step 2

Interest per month = Interest per annum / No of months

$= \frac{9000}{12}\\ = 750 \space per\space month$

Interest per month = 750