Joyce took out a loan for $21,900 at 12% on March 18, 2018, which will be due on January 9, 2019. Using ordinary interest, Joyce will pay back on Jan. 9 a total amount of:
A)$2,167.10
B)$24,068.10
C)$24,038.40
D)$2,138.40
E)None of these

Question

Quizplus · Accepted Answer

Ordinary interest uses a 360-day year to calculate the interest due on a loan. The interest Joyce will pay back can be calculated using the formula: Interest = Principal × Rate × Time, where Time is the number of days the loan is taken out for divided by 360. The period from March 18, 2018, to January 9, 2019, is 297 days (March 18 to March 31 is 14 days, April to December is 9 months or 9 × 30 = 270 days, and January 1 to January 9 is 9 days, so 14 + 270 + 9 = 297 days). The interest Joyce will pay is: $21,900 × 12% × (297/360) = $21,900 × 0.12 × 0.825 = $2,168.10. Therefore, the total amount Joyce will pay back on January 9 is the principal plus the interest, which is $21,900 + $2,168.10 = $24,068.10.

Joyce Took Out a Loan for $21,900 at 12% on March