Question

Amy pays interest each month on a loan of £4000. After 3 months she has paid a total of £27 interest. Work out the monthly rate of interest.

Answer 1

To calculate the monthly rate of interest that Amy pays on her loan, we can use the information provided:

1. Total loan amount: £4000

2. Total interest paid in 3 months: £27

The formula to calculate the interest rate per month is:

`\[\text{Monthly Interest Rate} = \frac{\text{Total Interest Paid}}{\text{Total Principal}} * \frac{1}{\text{Number of Months}}\]`

Plugging in the values:

`\[\text{Monthly Interest Rate} = (27)/(4000) * (1)/(3)\]`

Let's calculate this.

The monthly rate of interest that Amy pays on her loan is approximately
`\(0.225\% \).`