Example 1. On Jan. 1 of a non-leap year, I borrow $5,000 at 3% simple interest per year. How much do I owe on May 1? How much would I owe after 3 years?
Solution. On May 1, I have had the money for 31+28+31+30 = 120 days, which is 120/365th of a year. Hence, I owe
dollars.
After 3 years, I owe
120
1 + 365 .03 5000 = 5049.32
(1 + 3(.03))5000 = 5450.00
Remark. In dealing with money, we will usually round our answers
