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Real-Life Math -- Solution

Truck cost $25,000
Hong has paid $5,000
Balance remaining = $20,000

To calculate the total arrears (amount that is outstanding), first find the per diem rate of interest.

Per diem rate of interest = 10 percent / 365 days a year
per diem rate of interest = 0.10 / 365
per diem rate of interest = 0.000274 or 0.0274 percent

To find the total arrears, multiply the per diem rate of interest (0.0274 percent) times the amount outstanding ($20,000).

0.000274 x $20,000 = $5.48 per day

Hong owes $5.48 per day and he hasn't made payments for 300 days. So he owes the balance ($20,000) plus interest (300 days x $5.48)

Full amount owing = $20,000 + (300 x $5.48)
Full amount owing = $20,000 + $1,644
Full amount owing = $21,644

Hong owes a total of $21,644.


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