My Math Forum  

Go Back   My Math Forum > High School Math Forum > Elementary Math

Elementary Math Fractions, Percentages, Word Problems, Equations, Inequations, Factorization, Expansion


Reply
 
LinkBack Thread Tools Display Modes
March 10th, 2014, 11:37 PM   #1
Senior Member
 
shunya's Avatar
 
Joined: Oct 2013
From: Far far away

Posts: 422
Thanks: 18

The better deal

Suppose that you have $1000 in a savings account that pays 4.8% interest per year. Suppose, also, that you owe $500 at 1.5% per month interest.
a) if you pay the interest on your loan for one month so that you can collect one month's interest on $500 in your savings account, what is your net gain or loss?
b) if you pay the loan back with $500 from your savings account rather than pay one month's interest on the loan, what is your net gain or loss?
C) what strategy do you recommend?

I couldn't understand this problem. So any help will be deeply appreciated. Thanks
shunya is offline  
 
March 11th, 2014, 09:20 AM   #2
Math Team
 
Joined: Oct 2011
From: Ottawa Ontario, Canada

Posts: 14,415
Thanks: 1025

Re: The better deal

Loan, 1 month: 500 * .015 = 7.50

Savings, 1 month: 500 * (.048 / 12) = 2.00

Quite evident, right?

Difference of 5.50: enough to pay barber to shave your beard :P
Denis is offline  
March 12th, 2014, 08:24 AM   #3
Senior Member
 
Joined: Jan 2014
From: The backwoods of Northern Ontario

Posts: 390
Thanks: 70

Re: The better deal

I don't understand the problem as it is written, either:
Quote:
Suppose that you have $1000 in a savings account that pays 4.8% interest per year. Suppose, also, that you owe $500 at 1.5% per month interest.
a) if you pay the interest on your loan for one month so that you can collect one month's interest on $500 in your savings account, what is your net gain or loss?
b) if you pay the loan back with $500 from your savings account rather than pay one month's interest on the loan, what is your net gain or loss?
C) what strategy do you recommend?
If you have $1000 in your savings account and you leave it in there, you will be receiving interest on the $1000, not on $500. Thus:

a) if you pay the interest on your loan for one month, you pay .015500 = 7.50
The interest you receive on your savings for one month is .048100012 = 4.00
Thus you will have a loss of $3.50

b) if you pay back your loan from your savings, you will be receiving interest on your savings of $500, but will have no debt.
Your interest will be .04850012 = 2.00
Thus you will have a gain of $2.00
Timios is offline  
Reply

  My Math Forum > High School Math Forum > Elementary Math

Tags
deal



Thread Tools
Display Modes


Similar Threads
Thread Thread Starter Forum Replies Last Post
How to deal with powers of i zalmanq Algebra 3 May 9th, 2012 03:53 AM
simple question, hard to deal with! Snoopy Abstract Algebra 6 July 1st, 2011 10:43 AM
Deal or No Deal Singularity Advanced Statistics 5 May 14th, 2010 11:39 AM
Deal or no Deal winning strategy GoldMember Advanced Statistics 3 April 5th, 2010 05:59 PM





Copyright © 2019 My Math Forum. All rights reserved.