Question

Billy Thornton borrowed $20,000 at a rate of 7.25%, simple interest, with interest paid at the end of each month. The bank uses a 360-day year. How much interest would Billy have to pay in a 30-day month

Answer 1

Answer:

Interest for a 30 day month = $120.83

Explanation:

Interest rate rate is the price paid by a borrower for the use of money and the return earned by a lender for postponing his consumption in favour of investment.

Interest is computed in two ways; Simple interest and compound interest

Simple interest: This is the interest paid on the principal invested or borrowed. To calculate simple interest, we use the formula below:

Annual Simple interest= Principal × interest Rate (%) × Time.

Monthly simple interest =Principal ×interest Rate (%)× 30/360

                                   = 20,000 × 7.25% × 30/360= 120.833

Interest for a 30 day month = $120.83