Savings as Security Golda Frankl borrowed $800 for 6 months from her bank, using

Question

Savings as Security Golda Frankl borrowed $800 for 6 months from her bank, using her savings account as security. A bank rule limits the amount that can be borrowed in this manner to 85% of the amount in the borrower's savings account. The rate of interest is 2% higher than the interest rate being paid on the savings account. The current rate on the savings account is What rate of interest will the bank charge for the loan? Determine the amount that Golda must repay in 6 months. How much money must she have in her account to borrow $800?

Explanation / Answer

Amount borrowed by Golda Frankl = $800 Amount that can be borrowed is 85% of the amount in savings account. Let the amount in savings account be x Therefore, 85/100 = 800/x, x = 800*100/85 = $941.176. The Current rate of interest on the savings is 5.5%. Rate of interest the bank will charge for the loan = 5.5 +2 = 7.5 % (given) Interest to be paid = $ (800*7.5*1)/(2*100) = $30. Amount to be repaid by Golda Frankl = $ ( 800+30) = $830.

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