Question

If you take out a loan for $4,000 and you will owe $4,920 after 2 years, what is the rate of simple interest?

Answer 1

11.5%

Explanation:

Given : loan amount is 4000

Amount after 2 years is 4920

Interest earned is amount after 2 years minus the loan amount

`4920-4000= 920`

So interest earned is $920

Simple interest formula is

`I= Pnr`

Where P is the principal amount, r is the rate of interest , n is the number of years, I is the interest earned

`I= Pnr`

`920= 4000 \cdot 2 \cdot r`

`920= 8000 \cdot r`

divide both sides by 8000

r= 0.115

Now multiply by 100 to get the percentage of interest rate

r= 11.5 %