Question

To borrow money, you pawn your guitar Based on the value of the guitar, the paunbroker loans you $720. One month later, you get the guitar back by paying the paunbroker $1272. What annual interest rate did you pay?

You will pay a simple interest rate of
(Round to the nearest whole number as needed)

Answer 1

To determine the annual interest rate paid, we need to calculate the simple interest for one month and then convert it to an annual rate.

The formula for simple interest is:

Simple Interest = Principal × Rate × Time

In this case, the principal amount is $720, and after one month, you pay back a total of $1272. Therefore, the interest paid is:

Interest = $1272 - $720 = $552

We can now calculate the monthly interest rate:

Rate = Interest / Principal = $552 / $720 ≈ 0.7667

To convert the monthly interest rate to an annual rate, we multiply it by 12:

Annual Rate = Monthly Rate × 12 = 0.7667 × 12 ≈ 9.20

Therefore, you paid an annual interest rate of approximately 9.20%.