Question

If a person borrows $1900.00 and, after 9 months, pays off the loan in the amount of $1942.75, what per annum rate of interest was charged?

a) 4%
b) 6%
c) 8%
d) 10%

Answer 1

The annual interest rate for a loan of $1900 paid off as $1942.75 after 9 months, using the simple interest formula, is calculated to be 2.5%. However, this rate does not match the options provided suggesting a possible error in the question or the choices.

Step-by-step explanation:

To calculate the annual interest rate charged on a loan of $1900 that was repaid as $1942.75 after 9 months, you would use the simple interest formula:

I = PRT

Where I is the interest, P is the principal amount, R is the rate of interest per year, and T is the time in years. Here, the interest (I) is $1942.75 - $1900 = $42.75, the principal (P) is $1900, and the time (T) is 9/12 years.

Substitute these values into the formula to find R:

$42.75 = $1900 × R × (9/12)

R = ($42.75 ÷ $1900) ÷ (9/12)

R = 0.025 or 2.5%

However, since none of the options provided (4%, 6%, 8%, 10%) match 2.5%, there could be a mistake in the question or the options given.