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Homework answers / question archive / An automotive dealer borrowed $9000

An automotive dealer borrowed $9000

Math

An automotive dealer borrowed $9000.00 from the Bank of Montreal on a demand note on May 15. Interest on the loan, calculated on the daily balance, is charged to the dealer's current account on the 15th of each month. The automotive dealer made a payment of $1800 on July 20, a payment of $4400 on October 1, and repaid the balance on December 1. The rate of interest on the loan on May 15 was 5% per annum. The rate was changed to 5.4% on August 1 and to 5.9% on October 1. What was the total interest cost for the loan? The total interest cost for the loan is $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)

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Answer

Total interest cost = $ 189.18

Calculation of interest cost:

Interest from

Days

Base Amount for interest

Interest Calculation

Interest

May 15 to June 15

32

$ 9000

$ 9000 *0.013699%*32

$ 39.45312

June 16 to July 15

31

$ 9,039.45312

($9,000+ $ 39.45312)

$ 9,039.45312 * 0.013699%*31

$ 38.387755

July 16 to July 19

4

$ 9,039.45312

$ 9,039.45312* 0.013699% * 4

$ 4.953259

 

 

July 20 to July 31

(After repayment of $ 1,800)

12

$ 7,239.45312

($ 9,039.45312 - $ 1,800)

$ 7,239.45312 * 0.013699% * 12

$ 11.900792

 

August 1 to August 15

15

$ 7,239.45312

$ 7,239.45312 * 0.014794 %* 15

$ 16.065070

 

August 16 to September 15

31

$ 7272.372241

($ 7,239.45312

+$ 4.953259

+ $ 11.900792 + $ 16.065070 )

$ 7272.372241* 0.014794 %* 31

$ 33.35212

 

September 16 to September 30

15

$ 7305.724361

($ 7272.372241

+$ 33.35212)

$ 7305.724361 * 0.014794 %* 15

$ 16.21213

 

October 1 to October 15

(After repayment of $ 4,400)

15

$ 2905.724361

($ 7305.724361

- $ 4,400)

$ 2905.724361* 0.016164 %*15

$ 7.045219

October 16 to November 15

31

$ 2928.98171

($ 2905.724361 + $ 16.21213+ $ 7.045219)

$ 2928.98171* 0.016164 %*31

$ 14.676659

November 16 to November 30

15

$ 2943.658369

($ 2928.98171 + $ 14.676659)

$ 2943.658369* 0.016164 %*15

$ 7.137194

Repayment on December 1 of

$ 2950.79556

  

$ 2950.79556

($ 2943.658369

+ $ 7.137194)

    

Total

      

189.183318

W.N. 1

Daily Interest rate from May 15 to July 31 =        5%      = 0.013699 %

                                                                         365 days    

Daily Interest rate from August 1 to September 30 =        5.4%      = 0.014794 %

                                                                                          365 days       

Daily Interest rate from October 1 to November 30 =        5.9%      = 0.016164 %

                                                                                         365 days     

 

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