To compete with Rimrock's offer by charging $1125 less in interest, South Side National must lower their interest rate. The interest rate can be calculated using the formula:
Interest = Principal * Rate
Let's assume the principal amount being considered is $10,000 for simplicity. The interest difference between the two offers is $1125.
Rimrock's interest = $10,000 * Rate
South Side National's interest = $10,000 * (Rate - $1125)
Given that South Side National wants to quote the exact interest rate needed to compete with Rimrock and charge $1125 less, we can set the two interest amounts equal to each other:
$10,000 * Rate = $10,000 * (Rate - $1125)
$10,000 * Rate = $10,000 * Rate - $11,250
$11,250 = $10,000 * Rate - $10,000 * Rate
$11,250 = $10,000 * Rate - $10,000 * Rate
$11,250 = $10,000 * Rate - $10,000 * Rate
$11,250 = $10,000 * Rate - $10,000 * Rate
Solving for Rate:
$11,250 = $10,000 * Rate - $10,000 * Rate
$11,250 = $0 * Rate
Therefore, South Side National would not be able to compete with Rimrock by charging $1125 less in interest using exact interest. It would not be possible to quote a rate to the nearest hundredth due to the contradiction in the initial comparison.
If south side national wants to compete with Rimrock last offer by charging 1125 less interest. What rate (as a %) rounded to the nearest hunderedths or a percent must it quote using exact interest
1 answer