Question

Jay Field’s bank granted him a single-payment loan of $6,800. He wanted to compare repaying the loan in 91 days at an ordinary interest rate of 4.25% to repaying the loan in 91 days at an exact interest rate of 4.23%. Which interest rate is a better deal for Jay? How much does he save?

Answer 1

Answer:

Amount of loan = $6800

Time period = 91 days

When interest rate is 4.25%

$Amount = 6800\times(1+\frac{4.25}{12\times 100})^{12\times\frac{91}{30\times 12}}\\\\Amount=\ 6873.32$

When interest rate is 4.23%

$Amount = 6800\times(1+\frac{4.23}{12\times 100})^{12\times\frac{91}{30\times 12}}\\\\Amount=\ 6872.96$

So, the amount paid with 4.23% interest rate is less

Hence, 4.23% interest rate is a better deal for Jay.

Amount saved = 6873.32 - 6872.96

                          = $0.36

Answer 2

I don't know if you still need help with this, but the answer is exact interest and he saves $1.34.