To find the simple interest rate on the loan, you can use the formula for simple interest:
Simple Interest (I) = Principal (P) x Rate (R) x Time (T)
Where:
- I is the interest paid
- P is the principal amount (the initial loan amount)
- R is the interest rate (in decimal form)
- T is the time (in years)
In this case, you have:
- Principal (P) = $10,000
- Total amount repaid (Principal + Interest) = $11,950
- Time (T) = 1 year
You want to find the interest rate (R). Rearrange the formula to solve for R:
R = I / (P * T)
First, calculate the interest paid (I) by subtracting the principal from the total amount repaid:
I = $11,950 - $10,000 = $1,950
Now, plug in the values into the formula:
R = $1,950 / ($10,000 * 1)
R = $1,950 / $10,000
R = 0.195
To express the interest rate as a percentage, multiply by 100:
R = 0.195 * 100
R = 19.5%
So, the simple interest rate on the loan was 19.5%.