Question

As a percentage, what was the annual interest rate of her loan?

Answer 1

Answer:

The annual interest rate of her loan is 9%

Explanation:

Given:

Amount borrowed = $5000

Time = 2 years

Total interest = $900

To find:

the annual interest rate of her loan

Since the charge on the loan is on simple interest, to determine the interest rate, we will apply simple interest formula:

$\begin{gathered} I\text{ =}PRT \\ I\text{ = interest} \\ P\text{ = amount borrowed} \\ R=\text{ interest rate} \\ T\text{ = time} \end{gathered}$

substitute the values into the formula:

$\begin{gathered} 900\text{ = 5000 }\times\text{ R }\times\text{ 2} \\ 900\text{ = 10000R} \end{gathered}$$\begin{gathered} divide\text{ both sides by 10000:} \\ \frac{900}{10000}\text{ = }\frac{10000R}{10000} \\ R=\text{ 9/100} \end{gathered}$$\begin{gathered} In\text{ percentage: r = }\frac{9}{100}\times\text{ 100} \\ R=\text{ 9\%} \end{gathered}$

The annual interest rate of her loan is 9%