Question

Given the formula of sample interest where I is the interest in dollars P is the principal in dollars are is the interest rate as a decimal and te is the time period in years

Answer 1

Interest: Subtract the principal from the maturity value:

`I=9,270-9,000=270`

I= $270

Principal: Value of the loan

P=$9,000

time: Turn the 3-months into years:

`3\text{months}\cdot\frac{1\text{year}}{12\text{months}}=0.25\text{years}`

t=0.25 years

Having the data for P, I and t, use the formula (I=Prt) to solve r:

`\begin{gathered} I=P\cdot r\cdot t \\ r=(I)/(P\cdot t) \\ \\ r=(270)/(9,000\cdot0.25)=(270)/(2,250)=0.12 \end{gathered}`

Interest rate: r=0.12

Multiply the interest rate by 100 to write it as a percent:

`0.12\cdot100=12`

Annual simple interest rate: 12%