Hey guys! I have another problem. "You owe $100 on a payday loan. The loan charges 10% interest every month. That is, after one month you will owe $107.50." Write a formula for the value of the loan after t months. ............ Now is this a typo? How do you get 107.50 after 1 month if the interest is 10%? I have not asked my teacher yet but though I would start here for some help on how to solve.
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Help with a problem... is this an error?
- Thread starter jakebake
- Start date
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Hey guys! I have another problem. "You owe $100 on a payday loan. The loan charges 10% interest every month. That is, after one month you will owe $107.50." Write a formula for the value of the loan after t months. ............ Now is this a typo? How do you get 107.50 after 1 month if the interest is 10%? I have not asked my teacher yet but though I would start here for some help on how to solve.
According to my interpretation - the amount owed after one month should be $110, after second month $ 121 and so on....
If 10%: $110
If 7.5%: $107.50
As far as a formula goes, we need to know if simple or compound interest.
I do not think there are any special rules that I know of for a payday loan ... it is just borrowing money. That is why I thought there must be an error because 10% interest of 100 after one month should be $110. THe problem just says to write a formula for the value of the loan after t months. Does not say if it is simple or compound but I think it would have to be simple. Formula I would get is B(t) = 100*1.10^t ...