Answer:
Interest rate on the loan is approximately 5%
Explanation:
The interest rate on the loan can be found by using the compound interest formula.
FV = P(1 + r)^t
Where: FV = Future value
P = Principal amount
r = Interest rate
t = Time period in years.
FV = $9,250
P = $8,000
t = 3 years
r = unknown
Substitute the values above into the formula
9,250 = 8,000 (1+r)^3
Divide both sides by 8000
9,250/8000 = (8,000 (1+r)^3)/8000
1.15625 = (1+r)^3
Find the cube root of both sides
[tex]\sqrt[3]{ 1.15625}[/tex] = [tex]\sqrt[3]{(1+r)^3}[/tex]
1.049584113 = 1+r
Subtract 1 from both sides
1.049584113 - 1 = 1+r - 1
0.049584113 = r
r = 0.049584113
r ≈ 0.05 = 5%
That is, the interest rate on the loan is approximately 5%