Question

Ruth and Juan Dimas would like yo borrow $2,600 for 90 days to pay their real estate tax. State savings and Loan charges 7.25 percent ordinary interest while security bank charges 7.5 percent exact interest. What’s the maturity value of each loan?

Answer 1

Answer:

$2647.13

$2648.08

Step-by-step explanation:

To solve for the value of each loan we will use the formula:

$A=P(1+rt)$

Let's break down the variables that we have.

P = $2,600

r = 7.25% or 0.0725

r2 = 7.50% or 0.0750

t = 90 days

Now since we're computing for two different types of interest, let's take it one at a time.

First the State Saving and Loan.

In this situation we are solving for ordinary interest, where we compute with the total number of days are 360

$A=P(1+rt)$

$A=2,600(1+(0.0725)(\dfrac{90}{360})$

$A=2,600(1+(0.0725)(0.25)$

$A=2,600(1+0.018125)$

$A=2,600(1.018125)$

$A=2,647.13$

The maturity value of State Savings and Loan is $2,647.13.

Now let's move on to the Security bank.

The security bank charges 7.5% exact interest. For exact interest we use 365 days.

$A=2,600(1+(0.0750)(\dfrac{90}{365})$

$A=2,600(1+(0.0750)(0.246575)$

$A=2,600(1+(0.0184931)$

$A=2,600(1.0184931)$

$A=2,648.08$

The maturity value of the Security bank is $2,648.08.