Question

You can borrow $5,600 at 12% interest for 90 days from a lender that uses the exact interest method. You can borrow$5,600 at 12 % for 90 days from a lender that uses the ordinary interest method.

Answer 1

The total interest on a $5,000 loan at 6% for three years is $900. To find the interest rate on a $10,000 loan that earns $500 over five years, the rate is calculated to be 1%.

Step-by-step explanation:

To calculate the total amount of interest on a $5,000 loan with a simple interest rate of 6% for three years, you can use the formula Interest = Principal × rate × time. Applying these values:

Interest = $5,000 × 6% × 3 years = $900

The total interest for the loan over the three years would be $900.

To find the interest rate charged on a loan of $10,000, where $500 is received as simple interest over five years, rearrange the simple interest formula:

$500 = $10,000 × rate × 5 years

Solve for the rate:

rate = $500 / ($10,000 × 5) = 1%

The interest rate charged would be 1%.