Question

Adam Smith received a $875 discount loan to purchase an entertainment center. The loan was offered at 10.5% for 120 days. Find the interest in dollars and the proceeds for the following problem.

Answer 1

Answer:

Interest = $ 30.59

Proceedings = $ 844.41

Step-by-step explanation:

Principal = $875

Rate of Interest (r) = 10.5%

Time(t) = 120 days = 0.33 years

n = number of times the interest rate is compounded in one year

⇒ n = 12

$\text{Compound Interest = }Principal\times (1+\frac{rate}{100\times n})^{n\cdot t}\\\\\text{Compound Interest = }875\times (1+\frac{10.5}{12\times 100})^{12\times 0.33}\\\\\bf\implies \textbf{Compound Interest = }\ 905.59$

Now, Interest = Compound Interest - Principal

⇒ Interest = 905.59 - 875

                 = $ 30.59

And the proceedings are = Principal - Interest

                                           = 875 - 30.59

                                          = $ 844.41

Answer 2

Answer:

interest - $30.63

proceeds-$844.37