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An automotive dealer borrowed $9000
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.)
Expert Solution
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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