Question

Find the interest rates earned on each of the following:

a. you borrow $700 and promise to pay back $749 at the end of year 1.
b. you lend $700 and the borrower promises to pay you $749 at the end of year 1.
c. you borrow $85,000 and promise to pay back $201,229 at the end of 10 years.
d. you borrow $9,000 and promise to make payments of $2,684.80 at the end of each year for 5 years.

Answer 1

a. The interest earned on a loan of $700, when $749 is paid back at the end of year 1, is $49. b. The interest earned on lending $700, when $749 is paid back at the end of year 1, is $49. c. The interest earned on a loan of $85,000, when $201,229 is paid back at the end of 10 years, is $116,229. d. The interest earned on a loan of $9,000, with payments of $2,684.80 at the end of each year for 5 years, is $3,424.

Step-by-step explanation:

a. The interest earned on a loan of $700, when $749 is paid back at the end of year 1, can be calculated using the formula: Interest = Principal - Amount Borrowed. Therefore, the interest earned is $49.

b. The interest earned on lending $700, when $749 is paid back at the end of year 1, can be calculated using the same formula: Interest = Principal - Amount Borrowed. Therefore, the interest earned is $49.

c. To find the interest rate earned on a loan of $85,000, when $201,229 is paid back at the end of 10 years, we need to use the formula: Interest = Amount to be Paid Back - Principal. Therefore, the interest earned is $201,229 - $85,000 = $116,229.

d. To find the interest rate earned on a loan of $9,000, when payments of $2,684.80 are made at the end of each year for 5 years, we can use the formula: Interest = Total Payments - Principal. Therefore, the interest earned is ($2,684.80 * 5) - $9,000 = $3,424.