Question

Your friend borrows $100 from you and promises to pay you back $109 in 8 months. What annual percentage rate (A.P.R.) are you charging your friend? Round to the nearest tenth of a percent and write the answer as a decimal

Answer 1

You are charging 13.5% annual percentage rate to your friend .

Explanation:

Principal = $100

Amount = $109

Time = 8 months

12 months = 1 year

1 month =
`(1)/(12) year`

8 months =
`(8)/(12) year`

So, Time =
`(8)/(12) year`

SI = Amount - Principal = $109-$100=$9

Formula :
`SI =(P * R * T)/(100)`

`9=(100 * R * (8)/(12))/(100)`

`13.5\%=R`

Hence you are charging 13.5% annual percentage rate to your friend .