Final answer:
Mishika's loan terms indicate a principal amount of $10,000, a term of 6 years, and an annual interest rate of 9.99%. To understand the concept, an example of calculating simple interest for a $5,000 loan over three years at 6% yields $900 in interest. Another example involves determining an interest rate of 1% from receiving $500 in interest on a $10,000 loan over five years. So the correct answer is Option C.
Step-by-step explanation:
When Mishika is considering a 9.99% $10,000 loan to be repaid after 6 years, it means that the principal amount of the loan is $10,000, the term of the loan is 6 years, and she will be charged an interest rate of 9.99% annually. If we use these terms to calculate simple interest, the formula is Interest = Principal × rate × time.
For example, to calculate the total amount of interest from a $5,000 loan after three years with a simple interest rate of 6%, we would perform the following calculation: Interest = $5,000 × 0.06 × 3 = $900.
If you receive $500 in simple interest on a loan that you made for $10,000 for five years, the interest rate you charged can be determined by rearranging the simple interest formula: Rate = Interest / (Principal × time). So Rate = $500 / ($10,000 × 5) = 0.01 or 1%.