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?

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Answer 1 · 2016-05-04T05:51:19

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

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

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$ .