A small bookshop runs an overdraft of £1,000 for the past 12 months. The rate of interest on the overdraft was 8%. The bank has now written to the business saying that its overdraft rate will change to 10%? What will be the increase in its overdraft interest costs if it borrows £1,000 for another 12 months?
Select ONE answer:
- £100
- £80
- £20
- £10
- £50
What will be the increase in its overdraft interest costs if it borrows £1,000 for another 12 months at 16% interest?
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This is multiple choice question is suitable for Business Studies KS4 classes.
The answer is 3 – Year 1 interest = £1,000 * 8% = £80 Year 2 interest = £1,000 * 10% = £100. The difference is £100 -£80 = £20 increase in overdraft interest costs.
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