Question

A dealer borrowed $5000 on a 110-day 2% simple interest note. He paid $1000 toward the note on day 30. On day 80 he paid an additional $1000. Assume 360-day year, what is his ending balance due? (please make answer clear not handwriting)

Answer 1

Simple interest on $5,000 for the first 29 days = $5,000 X 2% X 29/360 = $8.06.

On day 30, $1,000 is being repaid out of which $8.06 is for interest and $991.94 is for principal.

Therefore, outstanding principal on day 30 = $5,000 - $991.94 = $4,008.06

Simple interest on $4,008.06 from day 30 to day 79 i.e. 50 days = $4,008.06 X 2% X 50/360 = $11.13

On day 80, $1,000 is being repaid out of which $11.13 is for interest and $988.87 is for principal.

Therefore, outstanding principal on day 80 = $4,008.06 - $988.87 = $3,019.19.

Simple interest on $3,019.19 from day 80 to day 110 i.e. 31 days = $3,019.19 X 2% X 31/360 = $5.20.

Therefore, the ending balance that is due = $3,019.19 + $5.20 = $3,024.39.