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1. Bijou Café's real estate tax of $1,110.85 was due on November 1, 2016, Due to financial problems,' the owner could not pay the café's'real estate tax bill until January 15, 2017. The penalty for late payment is 8'/4% ordinary interest.
Answer the following questions:
(a) How much is the penalty that must be paid?
(b) What did the cafe pay on January 15?
Show all of your work and calculations
Round all answers to the nearest cent.
My answer :
Ordinary interest is based on a 360-day year instead of a year consisting of 365 days. The formula for interest is
I (Intrest)=PRT where
P is the principal amount
R is rate
T is time.
P= $1,110.85
R=8 1/4 % = 0.0825
calculate the number of days that Bijou Cafe exceeded the deadline.
The tax was supposed to be paid on November 1, 2016. But he paid on January 15, 2017.
So he exceeded by 29 days in November, 31 days in December, and 15 days in January. In total, those are 75 days. The penalty is;
I= $1,110.85 x 0.0825 x ( 75/360)
$1,110.85 x0.0825 =91.575
75/360=0.2083333333333
91.575 x0.2083333333333 = 19.078124999969
Penalty= $19.09 to the nearest cent is $19.10
Part B
On January 15 the Cafe paid
$1,110.85 + $19.10=$ 1,129.95 to the nearest cent is $1,130.
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