Question

Tamaya borrowed $8,500 to buy a car. After 42 months, she ended up paying $1,785 in interest on the car loan. What was the simple interest rate on Tamaya’s car loan?

Answer 1

5%

Explanation:

We can use the formula for simple interest to solve for the interest rate:

I = Prt

where:

I is the interest

P is the principal (the amount borrowed)

r is the interest rate

t is the time in years

We know the principal (P) is $8,500, the interest (I) is $1,785, and the time (t) is 42 months, or 42/12 = 3.5 years. So, we can plug in the values and solve for r:

I = Prt

$1,785 = $8,500 * r * 3.5

$1,785 / $8,500 / 3.5 = r

r = 0.05, or 5%

So, the simple interest rate on Tamaya's car loan was 5%.