Question

I need help with the following question.

It is about Math of Finance.

Questions:

A $3500 loan was settled ten years later with a payment of $8100. Determine the annual rate of return.

Answer 1

The annual rate of return is 13.14%.

Explanation:

As it is not mentioned whether the amount was compounded, so we will assume this to be simple interest.

Given is - A $3500 loan was settled ten years later with a payment of $8100.

Means total amount paid back was = $8100

And original principle was = $3500

So, interest paid =
`8100-3500=4600` dollars

Now simple interest formula is :

`I=p* r* t`

Where p = 3500

I = 4600

r = ?

t = 10

Now putting these values in formula we get;

`4600=3500* r*10`

`r=4600/35000`

r= 0.1314

So, rate of interest = 13.14%