Question

The principal P is borrowed and the loan's future value A at time t is given. Determine the loan's simple interest rate r.

P = $5000,00, A = $5275.00, t = 1 year (Round to the nearest tenth of a percent as needed.)

Answer 1

The interest rate for this loan is 5.5%.

The loan's simple interest rate can be found by the formula:

= Interest amount / Amount borrowed x 100%

The interest amount is:

= Loan future value - Amount borrowed

= 5,275 - 5,000

= $275

Loan simple interest rate:

= 275 / 5,000 x 100%

= 5.5%

The loan's simple interest rate is therefore 5.5%.

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