Jim borrowed $12,108.00 to buy a car. If interest was charged on the loan at 7.43 percent p.a., how much interest would Jim have to pay in fifteen days?

To solve for how much interest Jim would have to pay in fifteen days, first calculate the amount of interest that the borrower would owe for a year by multiplying the principal, which is the amount borrowed, by the interest rate. Then find the interest rate per day by dividing the result of the first operation by 365. Finally, multiply the interest per day by the number of days.

Expert Answers

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To give you an idea of how to solve this problem, let's look at a simpler version so you can see the process you will need to follow. We'll work with the following scenario: Tom borrowed $1000 from the bank to purchase a new computer. The bank will charge him 5.5 percent interest p.a. (per annum, i.e., per year). Tom then came into some bonus pay and decided to pay off his loan in twelve days. We need to calculate how much interest Tom will have to pay.

We'll begin by calculating the interest Tom would have to pay for a whole year. To do that, multiple $1000 (the principal) by the annual interest rate of 5.5 percent. It's easier to convert the percent to a decimal, and when doing so we have 1000 x 0.055. Solving that, we have $55. If Tom kept the loan for the whole year, he would have to pay $55 in interest on it.

Our next step is to figure out how much interest that is per day. So we divide $55 by the number of days in a year, 365, and we come up with approximately $0.15. For every day Tom has that loan, he pays about $0.15 in interest.

The last step is simple. Tom has the loan for only twelve days, so we multiple the interest per day, $0.15 by 12, and we get $1.80. Tom will owe $1.80 in interest if he pays back that loan in twelve days.

Now follow the example, and plug in the numbers for your problem, and you should be able to see how much Jim would pay in interest on his car loan after fifteen days.

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