Question

If you paid $45 to a loan company for the use of $1,315 for 156 days, what annual rate of interest did they charge ? (Assume a 360-day year)

Answer 1

We are going to use the following equation:

$I=P\cdot r\cdot t$

Where is the interest paid, P is the principal, r is the annual rate and t is the time in years.

So, the time in years can be calculated as:

$\frac{156\text{ days}}{360\text{ days/year}}=0.4333\text{ year}$

Therefore, the annual rate r, can be calculated as:

$\begin{gathered} 45=1315\cdot r\cdot0.433 \\ 45=569.833r \\ \frac{45}{569.833}=r \\ 0.078=r \\ 7.8\text{ \% = r} \end{gathered}$

Answer: 7.8%