Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller

Exercise 106

Find (a) the exact interest and (b) the ordinary interest for each of the following to the nearest cent. Then find (c) the amount by which the ordinary interest is larger. (See Example.)
Finding Exact and Ordinary Interest

Radio station KOMA borrowed $148,500 on May 12 with interest due on August 27. If the interest rate is 10%, find the interest on the loan using (a) exact interest and (b) ordinary interest.
Quick TIP
Ordinary interest results in slightly more interest than exact interest. Thus ordinary interest favors those banks that use it when calculating loans.
SOLUTION
Either the table method or the method of the number of days in a month can be used to find that there are 107 days from May 12 to August 27.
(a) The exact interest is found from I = PRT with P = $148,500, R =.10, and T =
.

(b) Find ordinary interest with the same formula and values, except T =
.

In this example, the ordinary interest is $4413.75 ? $4353.29 = $60.46 more than the exact interest.
$29,500 at
% for 120 days