Answer:
Total amount to be repay is $ 1604.4
The annual interest rate the company actually charging is 25.40%
Step-by-step explanation:
Given: A radio commercial for a loan company states: “You only pay $0.29 a day for each $500 borrowed.” We have borrowed $1,500 for 120 days.
We have to determine the amount to be repay and the annual interest rate the company actually charging.
UNITARY method is a method in which we first find the value of a single unit and then find the desired value by multiply it with unit value.
Since, we have to pay $0.29 a day for each $500 borrowed.
Thus, when we borrow $1 , we pay [tex]\frac{0.29}{500}[/tex]
So, when $1500 is borrowed , we pay [tex]\frac{0.29}{500}\times 1500=0.87[/tex]
Thus, for 120 days we pay 0.87 × 120 = $104.4
Thus, total amount to be repay = 1500 + 104.4 = $ 1604.4
and annual interest rate is given by,
[tex]SI ={P\times r\times t}[/tex]
We have to find rate
Simple interest = $ 104.4
Principal = $1500
time = 120 days
In year time is [tex]\frac{120}{365}[/tex]
Substitute, we have,
[tex]104.4=\frac{1500\times r\times 120}{365}[/tex]
Simplify, we have,
r = 25.40%
Thus, the annual interest rate the company actually charging is 25.40%