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? Express your answer as a percentage rounded to the nearest tenth of a percent if necessary, but do not include the percent sign.

Answer 1

11.5

Explanation:

Simple interest formula:

`I=P\cdot r\cdot t,`

where

I = interest

P = principal

r = rate

t = time

In your case,

P = $4,000

I = $4,920 - $4,000 = $920

t = 2 years

So,

`920=4,000\cdot r\cdot 2\\ \\r=(920)/(2\cdot 4,000)=0.115`

The rate as decimal is 0.115 that is 11.5% as percent