If a loan of 1,500 at 4% is paid off in 90 days what is the interest

Question

asked Apr 18, 2021 153k views

1 Answer

Guadafan · Answer 1 · 2021-04-22T23:38:20+0000

Answer:

Compound interest =$14.58

Simple Interest=$14.79

Explanation:

Let's assume the interest rate charged on the loan was simple in nature.

-Simple interest is calculated using the formula:

$I=PRT,\\\\=1500* 0.04* (90)/(365)\\\\=14.79$

Hence, the simple interest on the loan was $14.79

#If the interest is compound in nature with just one compounding per year:

$A=P(1+i)^n\\\\I=A-P\\\\I=1500(1.04)^(90/365)-1500\\\\=14.58$

Hence, the compound interest charged on the loan is $14.58