Question

Alison Alix goes to the bank and borrows 150,000 pesos at 9.5% for 250 days. If the bank uses the ordinary interest method, how much interest will Alison have to pay?

Answer 1

In the ordinary interest method, interest (I) is computed as follows:

I = Prt

where P is the principal, r is the annual interest rate (as a decimal), and t is time in years. With this method, the year has 360 days instead of 365.

Substituting in the formula with P =150,000 pesos, r = 0.095 (= 9.5/100), and t = 250/360, we get:

$\begin{gathered} I=150,000\cdot0.095\cdot\frac{250}{360} \\ I=9895.83\text{ pesos} \end{gathered}$

Alison will have to pay 9,895.83 pesos