Finite Math Hw question very frustrating

• Oct 5th 2011, 02:07 PM
oshkosh
Finite Math Hw question very frustrating
I understand how to use A=P(1+rt) and also the compound interest formula, but I have been stuck on this problem for 2 days and dont know how to put it in the formula. Im pretty sure you have to use the A=P(1+rt) formula, but i do not know what are the variables from this problem

The problem is:
If you paid \$34 to a loan company for the use of \$1606 for 98 days, what annual rate of interest did they charge? (Assuming a 360 day year.)

How do i do this problem?
• Oct 5th 2011, 02:10 PM
oshkosh
Re: Finite Math Hw question very frustrating
Im assuming i am suposed to use A=P(1+rt)
A be 1606
would t be 98/360 ?
and would P be 34 ?
• Oct 5th 2011, 03:16 PM
Deveno
Re: Finite Math Hw question very frustrating
P is the principal (amount of the loan) which is, in this case, 1606.

A is the principal plus all interest, or the amount you have to pay back (in all). in this case, A = 1606 + 34 = 1640.

so we have: 1640 = 1606(1 + rt) ---> rt = 1640/1606 - 1 = 34/1606 = 17/803

we want to expess t in years, since we are seeking an annual percentage rate for r.

assuming a 360-day year, t = 98/360 = 49/180, so r = (17/803)(180/49) = 3060/39347 = 0.0778 (approximately),

so r is 7.78% apr.
• Oct 5th 2011, 03:27 PM
oshkosh
Re: Finite Math Hw question very frustrating
I am following up until r.

How did we get r=(17/803) ?
• Oct 5th 2011, 06:39 PM
Deveno
Re: Finite Math Hw question very frustrating
rt = 17/803, not r.
• Oct 5th 2011, 06:45 PM
Prove It
Re: Finite Math Hw question very frustrating
Quote:

Originally Posted by oshkosh
I understand how to use A=P(1+rt) and also the compound interest formula, but I have been stuck on this problem for 2 days and dont know how to put it in the formula. Im pretty sure you have to use the A=P(1+rt) formula, but i do not know what are the variables from this problem

The problem is:
If you paid \$34 to a loan company for the use of \$1606 for 98 days, what annual rate of interest did they charge? (Assuming a 360 day year.)

How do i do this problem?

Why would anyone assume there are 360 days in a year?
• Oct 5th 2011, 06:52 PM
Deveno
Re: Finite Math Hw question very frustrating
the babylonians did....
• Oct 5th 2011, 06:58 PM
Prove It
Re: Finite Math Hw question very frustrating
Quote:

Originally Posted by Deveno
the babylonians did....

And are we to assume that the OP's teacher possessed by an Ancient Babylonian spirit who can't function in our world today?
• Oct 5th 2011, 07:14 PM
Deveno
Re: Finite Math Hw question very frustrating
it could happen....honestly, i don't know why that assumption is there. even "apr" is bound to be slightly off, as a "year" is not a uniform length of time in days (should we use 365? 508/73? the actual number of days expressed as seconds*86,400?). in any case, it seems to be widely used in financial circles...see 360-day calendar - Wikipedia, the free encyclopedia