Question

Laura borrowed $700 from a bank for 3 years and was charged simple interest. The total interest that she paid on the loan was $63. As a percentage, what was the annual interest rate of her loan?

Answer 1

The Solution.

By formula, simple interest is given as below:

`I=\frac{\text{PRT}}{100}`

In this case,

`\begin{gathered} I=\text{ \$63} \\ P=\text{ \$700} \\ T=3\text{years} \\ R=\text{?} \end{gathered}`

Substituting the above values in the formula, we get

`63=(700* R*3)/(100)`

Solving the above equation, we get

`\begin{gathered} 63=7* R*3 \\ 63=21R \end{gathered}`

Dividing both sides by 21, we get

`R=(63)/(21)=3\text{ \%}`

So, the interest rate is 3%.

Thus, the correct answer is 3%