Question

A debtor’s account is overdue by 4 months. The outstanding balance is R2276.

Calculate interest charged on the debtor at 12% per annum. Show all calculations

Answer 1

To calculate the interest charged on a debtor's account that is overdue by 4 months at an annual interest rate of 12%, we can use the formula for simple interest:

\[
\text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time}
\]

Where:
- **Principal** = the outstanding balance (R2276)
- **Rate** = the annual interest rate (12% or 0.12)
- **Time** = the period the account has been overdue, expressed in years. Since the account is overdue by 4 months, this can be converted to years:
\[
\text{Time} = \frac{4 \text{ months}}{12 \text{ months/year}} = \frac{1}{3} \text{ years} \approx 0.3333 \text{ years}
\]

### Step 1: Plug the values into the formula

\[
\text{Interest} = 2276 \times 0.12 \times \frac{1}{3}
\]

### Step 2: Calculate the interest

1. **Calculate \(0.12 \times \frac{1}{3}\)**:
\[
0.12 \times \frac{1}{3} = 0.12 \times 0.3333 \approx 0.04
\]

2. **Calculate the interest**:
\[
\text{Interest} = 2276 \times 0.04
\]
\[
\text{Interest} = 91.04
\]

### Final Step: Conclusion

The interest charged on the debtor's account that is overdue by 4 months at an annual interest rate of 12% is approximately **R91.04**.