Question

The hemmings borrowed $3 000 for home improvements. They repaid the loan and $600 in simple interest four years later. What simple annual interest rate did they pay

Answer 1

To calculate the simple annual interest rate, we use the simple interest formula: I = PRT. With the given information, the Hemmings' annual interest rate turns out to be 5%.

Step-by-step explanation:

To find the simple annual interest rate the Hemmings paid, we can use the formula for simple interest: I = PRT, where I is the interest, P is the principal amount, R is the rate of interest per year, and T is the time the money is borrowed for in years.

In the Hemmings' case, they borrowed P = $3,000, paid I = $600 in simple interest, over a period of T = 4 years. We are looking to find R, the simple annual interest rate.

The formula with the known values is:

600 = 3000 × R × 4

To find R, we rearrange the formula:

R = 600 / (3000 × 4)

R = 600 / 12000

R = 0.05

So, R, the simple annual interest rate, is 0.05 or 5%.

Answer 2

5%

Step-by-step explanation:

Given that:

Principal = $3000

Simple Interest paid = $600

Period = 4 years

Simple interest = principal * rate * time

$600 = $3000 * rate * 4

$600 = $12000 * rate

Rate = $600 /$12000

Rate = 0.05

Hence, simple interest rate paid = (0.05 * 100%) = 5%