Question

A small Voice over Internet Protocol (VolP) provider borrowed $2 million for new equipment and repaid the principal of the loan plus $275,000 interest after 1 year. What was the interest rate on the loan?

Answer 1

The interest rate on the loan is 13.75%.

Step-by-step explanation:

To find the interest rate on the loan, we can use the formula:

Interest = Total amount repaid - Principal

In this case, the total amount repaid is $2,275,000 and the principal is $2,000,000. Therefore, the interest on the loan is $275,000.

To calculate the interest rate, we can divide the interest by the principal and then multiply by 100 to get a percentage:

Interest Rate = (Interest / Principal) * 100

Plugging in the values, we have:

Interest Rate = ($275,000 / $2,000,000) * 100 = 13.75%

Therefore, the interest rate on the loan was 13.75%.