5. A loan shark offers to lend money at terms you cannot refuse. You borrow prin

Question

5. A loan shark offers to lend money at terms you cannot refuse. You borrow principal P dollars, then each day the loan shark adds a service fee of 25 cents to what you owe, followed by charging the oh so reasonable 1 percent per day interest on the total amount owed

a. Put together a spreadsheet to calculate how much you owe at the end of every day if you borrow 100 dollars.

b. Find a formula for your debt at the end of d days (given the 100 dollar principal) and test your formula against the result of your spreadsheet calculation.

c. How much would you owe at the end of a year?

Explanation / Answer

Answer:

a) If we borrow a 100 dollar, then the principal would be $100 as principal and fees would be $ 25 as on p dollar its 0.25 cents, so on 100 dollars it would be 25 dollars and interest would remain same at the rate of 1% on each day since it does change with the quantum of amount of money borrowed.

so equation would be

p= 100 dollars

x= service fees=25 dollars

I per day= interest rate =1%

so amount borrowed is equal to =principal + interest

for end of one day =(( principal + service fees)+ interest amount( (principal+ service fees)* interest rate * no of days/365))*30

=((125)+(125*0.01*1/365))*30

for whole month =$3750.103

B) formulae for the calculation would be=( principal + service fees)+ interest amount( (principal+ service fees)* interest rate * no of days/365))*30

c) At the end of the year, the debt will be= 3750.103*12=$45001.23

Note :I have taken month of 30 days.

Related Questions

Navigate

• Browse (All)
• Browse 5
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.