Question

Billy Thornton borrowed $20,000 at a rate of 7.25%, simple interest, with interest paid at the end of each month. The bank uses a 360-day year. How much interest would Billy have to pay in a 30-day month?

a. $139.88
b. $133.22
c. $120.83
d. $126.88
e. $146.87

Answer 1

Answer:

The correct answer is option c.

Explanation:

The formula of simple interest is given by ;

$S.I=\frac{P\time R\times T}{100}$

P = principle amount'

R = Rate at which interest is given

T =  time period

We have :

P = $20,000

R = 7.25%

T = 30 days

1 year = 360 days

$30 days=\frac{30}{360} years$

So, the simple interest after 30 days will be :

$S.I=\frac{\ 20,000\times 7.25\times 30}{100\times 360}$

= $120.83

Billy have to pay $120.83 in a 30-day month.