APR = annual percentage rate.
Since Pete is borrowing the money for one week, the APR must be divided into a daily interest rate before we can figure out how much he'll pay for the loan.
There are 365 days in a year. Divide the APR by 365 to find the daily interest rate.
[tex] \frac{600}{365} = 1.643[/tex]
The daily interest rate of the loan will be 1.643%.
The following equation is used to find the total interest payment:
[tex]A = P(1+ \frac{r}{365})^{t} - P[/tex]
A represents the total amount paid in interest. P represents the amount borrowed for the loan. r represents the daily interest rate. t represents the amount of days the loan will last.
Plug in your values into the equation.
[tex]P = 380, r = 1.643, t = 7[/tex]
[tex]380(1+ \frac{1.643}{365})^{7} - 380 = 12.136[/tex]
Rounded to the nearest hundredths value, the total interest paid will be $12.14.
Compare the total amounts paid for both loans.
$12.14 < $45
The better deal is the loan with the 600% APR.
