Question

You borrow 18,000 to buy a new car. You will pay 3,420$ In simple interest at the end of 6 years. What is the annual interest rate on your purchase?

Answer 1

I = Prt is the formula to use.

I = interest accrued. ($3420)

P= Principal ($18,000)

r = interest rate (what we're solving for)

t = time specified. (6 years)

3420 = 18,000 (r) (6)

3420 = 108,000

3420 ÷ 108,000 = 0.0316

We'll change the decimal to the percent by moving the decimal two place to the right. This will make it 3.2%.

Therefore, the annual interest rate would be 3.2%