Question

To borrow money, you pawn your guitar. Based on the value of the guitar, the pawnbroker loans you $720. One month later, you get the guitar back by paying the pawnbroker $1270. What annual interest rate did You pay? Round to the nearest whole number as needed)​

Answer 1

The student paid an interest of $550 for one month on a loan of $720. to calculate the annual interest rate, this amount was annualized and then divided by the principal to determine the rate. the calculated annual interest rate, when rounded to the nearest whole number, is 917%.

Step-by-step explanation:

To calculate the annual interest rate paid on a pawned guitar, we need to find out the interest paid over the course of one month, validate it for one year, and then express that as a percentage of the principle amount. the student borrowed $720 and paid back $1270 after one month. To find the interest paid, we subtract the loan amount from the total amount paid back: $1270 - $720 = $550.

This $550 is the interest paid for one month. To find the equivalent annual interest rate, multiply this monthly interest by 12 (as there are 12 months in a year): $550 × 12 = $6600.

The annual interest paid is $6600. Now, to find the annual interest rate, we divide the annual interest by the original loan amount and multiply by 100 to get a percentage: ($6600 / $720) × 100 = 916.67%, which rounds to 917% when rounded to the nearest whole number.

Therefore, the annual interest rate paid on the pawned guitar is 917%.