Question

On May 19, Bette Santoro borrowed $3,000 from Resse Bank at a rate of 12 1/2%. The loan is to be repaid on October 8. Assuming the loan is based on exact interest, what's the total interest cost to Bette?

Answer 1

The total interest cost to Bette is  $145.89

What is exact interest basis?

Exact interest means that the interest is computed on 365-day per year basis rather than a 360-day per year basis, which is the case with financial institutions.

The first task in this case is to determine the number of days from May 19, when the amount was borrowed till October 8, when loan repayment was effected.

There are 142 days between the two dates, hence, we can compute exact interest on the loan as shown by the below formula:

exact interest=loan principal*number of days the borrowing last/365days *interest rate

loan principal=$3000

number of days the borrowing last=142

interest rate=12.5%(1/2%=0.5%)

Exact interest=$3000*142/365*12.5%

Exact interest=$145.89

The amount would have been different if ordinary interest where the number of days in a year is deemed to be 360, was used instead

Find out more on exact interest on:brainly.com/question/10710550

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