Question

a) If your business borrows $100,000 for 7 days at an interest rate of 8%, how much interest will you pay? Show your work and express the answer in the proper format.

b) If the interest rate is 11%, how much will you pay on this 7-day loan? Show your work and express the answer in the proper format.

Answer 1

Answer a.

Loan Amount = $100,000
Annual Interest Rate = 8%
Period of Loan = 7 days

Annual Interest Rate = 8%
Daily Interest Rate = 8%/365 = 0.02192%

Total Interest = Loan Amount * Daily Interest Rate * Period of Loan
Total Interest = $100,000 * 0.02192% * 7
Total Interest = $153.44

So, total interest paid is $153.44

Answer b.

Loan Amount = $100,000
Annual Interest Rate = 11%
Period of Loan = 7 days

Annual Interest Rate = 11%
Daily Interest Rate = 11%/365 = 0.03014%

Total Interest = Loan Amount * Daily Interest Rate * Period of Loan
Total Interest = $100,000 * 0.03014% * 7
Total Interest = $210.98

Total Amount paid = Loan Amount + Total Interest
Total Amount paid = $100,000 + $210.98
Total Amount paid = $100,210.98

So, total amount paid is $100,210.98