Final answer:
Sanjay's annual interest rate on the loan from the Main Street Pawn Shop is calculated to be 75%, determined by dividing the $25 interest paid for one month by the $400 principal and then multiplying by 12 to annualize the rate.
Step-by-step explanation:
To calculate the annual interest rate Sanjay is being charged, we'll use the information that Sanjay has borrowed $400 on his father's watch from the Main Street Pawn Shop and agreed to pay $425 back one month later. This means he is paying $25 in interest ($425 - $400) for the use of $400 for one month.
To find the monthly interest rate, we divide the interest by the principal amount:
Monthly Interest Rate = Interest / Principal
= $25 / $400
= 0.0625 or 6.25%
Now, to find the annual interest rate, we multiply the monthly rate by 12 (since there are 12 months in a year):
Annual Interest Rate = Monthly Interest Rate * 12
= 6.25% * 12
= 75%
Therefore, the annual interest rate charged by the pawn shop is 75%.