Question

A vet Barro’s $12,000 for four years. The total interest paid was $875. What was the interest rate on the loan?

Answer 1

Answer:
R = 1.8229%/year

Equation:
r = (1/t)(A/P - 1)
Calculation:
Solving our equation:
r = (1/4)((12875/12000) - 1) = 0.01822917
r = 0.01822917

Converting r decimal to R a percentage
R = 0.01822917 * 100 = 1.8229%/year

The interest rate required to get a total amount, principal plus interest, of $12,875.00 from simple interest on a principal of $12,000.00 over 4 years is 1.8229% per year.