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26 December, 10:45

You are going to borrow $71,500.00 for 200 days. You are to be loaned the money at an interest rate of 9%, and you are given the option to choose exact or ordinary interest. Which would you choose? Explain.

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  1. 26 December, 14:29
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    You would choose exact interest. 200 days is a smaller fraction of 365 days than it is of 360 days, so the effective rate would be lower for exact interest.

    The amount of interest is

    ... I = Prt = 71,500·0.09·200/days

    The larger value you choose for days, the smaller the interest amount will be.
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