Answer :
To answer the question, we need to calculate the amount of interest for both an exact interest loan and an ordinary interest loan. Let's start with the exact interest loan:
**Exact Interest Loan:**
For exact interest loans, we use a 365-day year to calculate interest.
Given that the loan amount is $5,000, the interest rate is 7% (which is 0.07 as a decimal), and the loan period is 95 days, we use the following formula to calculate the exact interest:
Interest (Exact) = Principal × Rate × Time
Where Time is expressed as a fraction of the year (days the money is borrowed ÷ days in the year).
Thus, we have:
Interest (Exact) = $5,000 × 0.07 × (95 / 365)
Let's calculate that:
Interest (Exact) = $5,000 × 0.07 × 0.2602739726 (approximately)
Interest (Exact) = $91.10 (approximately)
**Ordinary Interest Loan:**
For ordinary interest loans, a year is considered to be 360 days.
We follow a similar formula to calculate the ordinary interest:
Interest (Ordinary) = Principal × Rate × Time
Again, Time is expressed as a fraction of the year (days the money is borrowed ÷ days in an ordinary year).
Interest (Ordinary) = $5,000 × 0.07 × (95 / 360)
Now, let's calculate that:
Interest (Ordinary) = $5,000 × 0.07 × 0.2638888889 (approximately)
Interest (Ordinary) = $91.97 (approximately)
In summary, the interest earned on a $5,000 loan for 95 days at 7% interest rate:
For an exact interest loan, the interest would be approximately $91.10.
For an ordinary interest loan, the interest would be approximately $91.97.
