Question

You borrow $18,000 to buy a new car. You will pay $3,240 in simple interest at the end of 6 years. What is the annual interest rate on your purchase?.

Answer 1

Simple Interest, I = PRT/100

3240 = 18 000 * R * 6 /100

3240 = 180*R*6

3240 / (180*6) = R Use your calculator

3 = R

The annual interest rate is 3%.

Answer 2

Annual Interest Rate on purchase is 3 %.

Explanation:

Principal, P = $ 18000

Simple Interest , SI = $ 3240

Time , T = 6 years

Let R be the interest rate.

Using Simple interest formula we get,

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

`3240=(18000* R*6)/(100)`

`3240=1080* R`

`R=(3240)/(1080)`

`R=3`

Therefore, Annual Interest Rate on purchase is 3 %.