Brady and Sons uses accounts receivable as collateral to bor

Brady and Sons uses accounts receivable as collateral to borrow money for operations and payroll when revenues are low. If the company borrows $300,000 now at an interest rate of 12% per year compounded monthly and the rate increases to 15% per year compounded weekly after 4 months, how much will the company owe at the end of one year?

At the end of the year, the company will owe $ -----

(398738 is a wrong answer)

Solution

formula for compond interest is =P(1+i in decimal/n)nt

In first four months the interest would be calculate monthly compound =

P=$300000 i =.12 .t=4 (4months), t = one year

=300000(1+.12/4)4 1

=337652.64 is amount after 4 months

Now interest rate is change for rest of the year and now compound weekly so the calculation would be

p= 337652.64 , i= .15 ,n=36 week ,t=1

=337652.64(1+.15/36) 36 1

=392174.11 would be amount after 1 year.