Share
Explore BrainMass

# Compound Interest and Time Value of Money

I just need to know how to take this equation A=P(1+r/365)^n and solve it for r this is what I came up with ((A/P)^1/n-1)365=r which though was right but when I plugged the numbers from the next part of the question the answers were not coming out right can you tell me if my equation for r is correct.

Here is the question:

Star financial Corp. offers short term loans as shown in the accompanying advertisement. If you borrow P dollars for n days at the annual percentage rate r, then you pay back A dollars where
A=P(1+r/365)^n

A. Solve the formula for r in terms of A,P, and n.

B. Find the annual APR for each of the loans in the ad.

Borrow You pay back
\$200 \$229
\$300 \$339
\$400 \$449

*if loan is paid out within 30 days

thus with the equation i got from solving for r this is how I plugged in the numbers

((229/200)^1/30-1)365=r that when I solved for came out to 1.65% for the APR which didn't seem right. Could you help me is it my equation for r or am I pulling the wrong information out of the problem to solve for the APR?

Thank you.

#### Solution Summary

Compund interest is investigated.

\$2.19