Thread: 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?

Im assuming i am suposed to use A=P(1+rt)
A be 1606
would t be 98/360 ?
and would P be 34 ?

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.

I am following up until r.

How did we get r=(17/803) ?

rt = 17/803, not r.

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?

the babylonians did....

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?

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