Question

You borrow $750 from your brother and agree to pay back $850 in 8 months. What simple interest rate will you pay?

a) 10%
b) 5%
c) 8%
d) 12%

Answer 1

To calculate the simple interest rate, we can use the formula: Simple Interest = Principal x Rate x Time. In this case, the Rate is 2%. Hence the correct answer is option A

Step-by-step explanation:

To calculate simple interest, we can use the formula: Simple Interest = Principal x Rate x Time.

We have the Principal ($750) and the amount to be paid back ($850). We need to find the Rate and the Time.

Using the formula, we can rearrange it to solve for Rate: Rate = (Simple Interest) / (Principal x Time).

In this case, the Simple Interest is $850 - $750 = $100. The Principal is $750 and the Time is 8 months.

Therefore, the Rate is ($100) / ($750 x 8) = 0.02 = 2%.

The correct answer is option a) 10%.