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. 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

Compound interest and the time value of money are investigated in the following posting.