Question

$142 interest is paid in an eight-month period on a $2,400 straight note. What is the interest rate? Select one: a. Between 7 ½% and 8%

b. Between 8 ½% and 9%
c. Between 8% and 8 ½%
d. Between 9% and 9 ½%

Answer 1

Using the simple interest formula and the information provided, the annual interest rate for the $2,400 note with $142 interest paid over eight months is between 8% and 8 ½%. Option c is the correct answer.

Step-by-step explanation:

To calculate the interest rate for a $2,400 straight note that paid $142 in interest over eight months, we can apply the simple interest formula: Interest = Principal × Rate × Time. For the given question, Interest ($142), Principal ($2,400), and Time (eight months or ⅓ of a year) are known variables. Applying these values, we get 142 = 2400 × Rate × ⅓. Solving for the interest rate (Rate) by dividing $142 by ($2,400 × ⅓) gives us a yearly interest rate of approximately 0.8875 or 8.875%.

Therefore, the correct answer is:
a. Between 7 ½% and 8%
b. Between 8 ½% and 9%
c. Between 8% and 8 ½%
d. Between 9% and 9 ½%

The annual interest rate falls between 8% and 8 ½%, which matches option c.