Question

If a bank provides overdraft protection at a rate of 12% for each $100 (or portion of $100) borrowed when an overdraft occurs, what amount of interest would a customer pay for a $188 overdraft

Answer 1

Answer:

The amount of interest a customer would pay for a $188 overdraft is $20.80.

Explanation:

Amount of interest on $100 = Overdraft protection rate *$100 = 12% * $100 = $12

Total overdraft = $188

Excess over $100 = Total overdraft - $100 = $188 - $100 = $88

Excess over $100 as a portion of $100 = 88 portion of 100 = (88 / 100) * 100 = $8.8 (Note: This has to be stated in dollar not in percentage.)

Total interest amount = Amount of interest on $100 + Excess over $100 as a portion of $100 = $12 + $8.80 = $20.80

Therefore, the amount of interest a customer would pay for a $188 overdraft is $20.80.