Question

A loan of $950 was repaid at the end of 12 months with a check for $970. What annual rate of interest was charged?

Answer 1

The annual rate of interest charged is approximately 2.11%.

Step-by-step explanation:

To find the annual rate of interest charged, we can use the formula:

I = P * r * t

Where:
- I is the interest charged
- P is the principal amount (loan amount)
- r is the annual interest rate
- t is the time (in years) the loan is borrowed for

In this case, we have:
- I = $970 - $950 = $20
- P = $950
- t = 1 year

Substituting these values into the formula, we can solve for r:
$20 = $950 * r * 1

Simplifying the equation, we get:
r = $20/$950 = 0.0211

So, the annual rate of interest charged is approximately 0.0211, or 2.11%.