Carol Miller went to Europe and forgot to pay her $820 mortgage payment on her New Hampshire ski house. For her 52 days overdue on her payment, the bank charged her a penalty of $23. (assume 360 days).
What was the rate of interest charged by the bank?
I = Po*r*t = $23.
820*(r/360)*52 = 23
118.44444r = 23
r = 0.194 = 19.4 %.
To determine the rate of interest charged by the bank, we can use the formula for simple interest:
Simple Interest = Principal × Rate × Time
In this case, the principal is the mortgage payment of $820, the time is 52 days (or 52/360 years), and the interest charged is $23. We need to find the rate.
Let's plug in the values we know into the formula and solve for the rate:
$23 = $820 × Rate × (52/360)
To solve for the rate, divide both sides of the equation by ($820 × (52/360)):
Rate = $23 / ($820 × (52/360))
Now, we can calculate the rate:
Rate = $23 / ($820 × (52/360))
= 0.003729 (rounded to 6 decimal places)
Therefore, the rate of interest charged by the bank is approximately 0.3729% per year.