Question

Your father borrows $40 and agrees to 24% interest in a year? He decide that he wants to payoff what he owe in 1/2 a year. How much does he have to pay you in 1/2 a year? Yo convince him to keep the money for 2 years how much would he pay you in 2 years?

Answer 1

(A) He needs to pay `$44.80`.

(B) If he keeps money for `2` years he needs to pay `$59.20`

Explanation:

As father borrows at `24%` interest in a year in April,

this amounts to paying `24/12` or `2%` interest every month,

Assuming it is simple interest, for a principal of `$40` amounts to

equivalent to `$40xx2/100` or #$0.80$ per month.

As he pays back in October, it is `6` months and hence

interest amounts to `6xx0.80=$4.80` and he needs to pay

`$40+4.80` or `$44.80`

If he keeps money for `2` years or `24` months, he needs to pay

`40+0.80xx24=40+19.20=59.20` or `$59.20`.