Question

John borrows $4,200 from her friend, and pays back $5,124 four years later. What annual rate

of simple interest does this correspond to?

Answer 1

Answer: 5.5%

Explanation:

To calculate the annual rate of simple interest:

1. Find the interest earned (I):

I = 5,124 - 4,200 = 924

2. Use the formula:

r = I / (P * t)

3. Substitute the values:

r = 924 / (4,200 * 4)

4. Calculate r:

r = 924 / 16,800

5. Simplify the fraction:

r = 77 / 1,400

6. Convert the fraction to a decimal:

r ≈ 0.055

7. To express as a percentage:

r ≈ 0.055 * 100 ≈ 5.5%

So, the annual rate of simple interest is approximately 5.5%.