Answer:
- exact: $197.26
- ordinary: $200
Step-by-step explanation:
The amount of interest is computed using the formula ...
I = Prt
where P is the principal borrowed, r is the annual interest rate, and t is the number of years.
When the loan is for less than a whole year, the number of days is converted to years using a value for the number of days in a year. For "exact" interest, that number is 365 days per year. For "ordinary" interest, a year is considered to be 360 days. The fraction of a year is the number of days divided by the number of days per year.
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If d is the number of days per year, then the above formula with the given values filled in looks like ...
I = 3600×0.08×(250/d) . . . . for d = 365 or 360 (exact or ordinary interest)
For exact interest:
I = $3600×0.08×250/365 ≈ $197.26 . . . . total exact interest
For ordinary interest:
I = $3600×0.08×250/360 = $200.00 . . . . total ordinary interest
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Additional comment
In the attached calculator display, we used a matrix to represent days per year. That way, we could do both calculations at once without having to re-enter the numbers.
