Question

Moira borrowed $4,500 from her grandfather to pay for her first year of college. Three years later, she repaid the $4,500 along with an interest of $243. What was the annual interest rate? Round your answer to one decimal place.

Answer 1

9514 1404 393

Answer:

1.8%

Explanation:

The effective rate can be found using the simple interest formula.

I = Prt . . . interest of principal P at annual rate r for t years

r = I/(Pt) . . . . solve for r

Using the given numbers, we have ...

r = 243/(4500·3) = 0.018 = 1.8%

The annual interest rate was 1.8%.